Petrol prices drive terms of trade down

Rising fuel prices knocked New Zealand's June quarter terms of trade index off its highs, official data showed today.

The terms of trade index, which measures the amount of imports a fixed amount of exports will purchase, fell 1 per cent in the June quarter, Statistics New Zealand said.

That follows a surprise 2.2 per cent rise in the March quarter to a 31-year high.

Economists polled by Reuters had expected a decrease of 1.2 per cent.

Surging prices for petroleum and petroleum products saw import prices rise 1.5 per cent in the quarter, against expectations for a 1 per cent rise, while export prices rose just 0.5 per cent, in line with expectations.

The petroleum and petroleum products index rose 23.6 per cent in the June quarter, following an 8.6 per cent fall in the previous quarter.

If the skyrocketing fuel costs were taken out, import prices would have fallen 0.7 per cent during the quarter.

Import volumes were driven to their highest level ever as the red-hot economy saw demand for capital and consumption goods skyrocket. The seasonally-adjusted volume of imports rose 3 per cent in the June quarter.

The import volumes index has risen 8 per cent since the December 2004 quarter, with capital goods, consumption goods, crude oil and passenger vehicles the main contributors.

Seasonally-adjusted export volumes were down 0.7 per cent, with meat and dairy products the main contributors. Commodities contributing to the fall were beef, milk and cream.

SNZ said the fall in the terms of trade index was despite a concurrent rise in the value of New Zealand dollar.

Measured on a trade weighted index basis, the kiwi was 1.8 per cent higher in the June quarter than in the March quarter.

Compared with the same quarter last year, the terms of trade index rose 7.3 per cent.

- NZPA