New Zealand's terms of trade fell to a three-year low in the September quarter as the country's strong currency ate into returns from an increasing volume of dairy exports.
The terms of trade, which measures how much imports can be bought with a fixed quantity of exports, fell 3.2 per cent in the three months ended September 30, according to Statistics New Zealand. That's more than the 1.8 per cent forecast in a Reuters survey of economists. Export prices sank 6.3 per cent, ahead of the 3.6 per cent expected, while import prices declined 3.3 per cent versus an anticipated 2 per cent fall.
The falling prices came even as export volumes beat expectations, rising 9.7 per cent in the quarter, while import volumes advanced 0.7 per cent.
Dairy, which accounts for about a quarter of New Zealand's exports, was the biggest contributor to the falling export prices and rising volumes, with volumes surging 32 per cent in the quarter, even as prices sank 13 per cent.
"Dairy export volumes are at record levels, after adjusting for seasonal effects," prices manager Chris Pike said in a statement. "Dairy values remain at high levels, even though export prices have fallen for five consecutive quarters."