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Higher prices for dairy product exports helped push New Zealand's terms of trade index up a much better than expected 4.1 per cent in the March quarter, figures published by Statistics New Zealand today show.
The terms of trade index, which measures the amount of imports a fixed amount of exports will purchase, has risen for six consecutive quarters to now be at 1240 - the highest for more than 34 years.
The rise in the terms of trade index is a result of a 4.5 per cent rise in export prices, while import prices were up 0.3 per cent in the quarter.
Statistics NZ said volumes were down for both exports and imports, but were still at the second highest levels on record after reaching highs in the December quarter.
For exports, volumes were down 3.5 per cent, with dairy products the main contributors to both price and volume movements.
Dairy product export prices rose 19.7 per cent in the March quarter to a new high, with rises recorded for milk and cream, butter and cheese.
At the same time dairy product volumes fell 10.6 per cent from the December quarter record, with volume falls in all dairy sub-indices except butter, Statistics NZ said.
For imports, volumes were down 0.9 per cent, while the 0.3 per cent rise in prices was driven by an 8.3 per cent rise in the prices of petroleum and petroleum products. When those products were excluded the price index for imports fell 1.1 per cent.
The fall in import volumes, which followed six consecutive quarterly increases, was led by transport equipment, mainly due to reduced volumes of aircraft imports compared with December.
Economists were expecting a far smaller rise in the terms of trade, with the median forecast in a Reuters poll having been for an increase of 0.3 per cent, with export prices up 2.4 per cent and import prices up 0.9 per cent.
SNZ said the terms of trade index was up 11.3 per cent in the year to the March quarter, with export prices up 12.5 per cent and import prices up 1.1 per cent.
For the year to the March quarter, the dairy products price index was up 63.3 per cent, the largest annual increase since the year to June 1972.
The dairy products index had now reached the highest level since the series started in 1950, SNZ said.
Among other contributors to the rise in the export price index was meat, up 17.5 per cent in the March quarter, and fish and fish preparations, up 3.6 per cent.
Partly offsetting the rise in total export prices was a 2.8 per cent fall in the aluminium sub-index for the March quarter.
Price falls were recorded for most aluminium products, and in the year to March aluminium prices fell 18 per cent, after having risen 14.4 per cent in the year to March 2007.
- NZPA
