There are lags between closely watched commodity market prices on the one hand and the contract prices for goods crossing the wharves, which is what the terms of trade reflect.
Even if it turns out that international oil prices found their bottom last month, the previous declines will still be having a positive impact on the terms of trade in the March quarter, and the rebound in Fonterra's dairy auction prices this year is expected to boost the terms of trade from the June quarter on.
While export prices for dairy products fell sharply in the December quarter, other commodities fared better. Export prices excluding dairy were up 4.9 per cent, Statistics NZ said. Half that gain can be put down to a 2.5 per cent fall in the NZ dollar's trade-weighted index.
Compared with a year earlier, export prices overall were down 7.6 per cent, but excluding dairy up 2.2 per cent. In the latest quarter beef prices soared 23 per cent, the steepest quarterly rise, and to the highest level, since comparable statistics began in 1971.
Forest product prices rebounded 8.4 per cent in the quarter, though they were still 2.8 per cent down on a year earlier. Fish prices rose 4.4 per cent in the quarter, and 5 per cent over the year, while aluminium prices rose 7.8 per cent in the quarter and 17 per cent over the year.
On the imports side, capital goods prices rose 1.2 per cent, influenced by higher prices for goods such as computer equipment, influenced by the lower NZ dollar, and consumer goods prices rose 2.3 per cent, offset by a 10 per cent fall in prices of crude oil and refined products.
ASB economist Nathan Penny said global inflation remained very low. Compared with December 2013, import prices are more than 3.2 per cent lower. "Given the generally sluggish global economy and deflation in some major economies, we expect broader import price weakness over the rest of 2015," he said.
"The global economy is awash with capacity, particularly for manufacturing and hard commodities. The same cannot be said for soft commodities like the ones that New Zealand exports."
Westpac economist Michael Gordon said the downturn in the terms of trade appeared to be nearing its end. "Lower oil import prices will again counteract the fall in dairy export prices in the March quarter, and dairy prices will be on the rise again from the June quarter.
"Indeed, the 'trough' in the terms of trade is shaping up to be higher than the previous peak seen in 2011."
