Trade stats come in strong for December

New Zealand's terms of trade rose an unexpectedly strong 5.7 per cent in the December quarter, says Stats NZ.

New Zealand's terms of trade rose an unexpectedly strong 5.7 per cent in the December quarter, as dairy product export prices went up despite a rising currency pushing down export and import prices.

The increase in the terms of trade was the largest since 1976 and followed six consecutive quarterly falls, Statistics New Zealand (SNZ) said today.

The terms of trade index measures the amount of imports a fixed amount of exports will purchase.

"A rising New Zealand dollar in the latest quarter had a downward influence on both export and import prices," SNZ prices manager Chris Pike said.

Import prices fell 5.8 per cent in the quarter, while export prices fell 0.3 per cent. Seasonally adjusted export volumes fell 1.2 per cent from the previous quarter, the first fall since the September 2008 quarter.

The median forecasts of economists polled by Reuters had been for a 2.5 per cent rise in the terms of trade. They had also expected import prices to fall 1.7 per cent and export prices to gain 2 per cent.

ASB Bank economist Jane Tuner said on the surface the trade figures were positive, but underlying the improvement was a weakness in some key New Zealand export products.

"Ongoing recovery in New Zealand's trading partners is key to an improvement in export prices in the future. A fall in the New Zealand dollar would also help export prices, but would be offset by a corresponding increase in import prices," said Turner.

"We expect some improvement in the export index in the short term, given Q4's result did not capture the full lift observed in dairy prices in late 2009. However, after that we expect the terms of trade to track sideways."



- NZPA WITH NZ HERALD