Seasonally adjusted export volumes fell 5.8%, reflecting declines in the dairy and meat sector but a 14% gain in dairy prices helped limit the drop in the value of exports to just 0.6%, at $11.3 billion.
New Zealand's terms of trade rose in the final three months of 2016 as the recovery in global dairy prices bolstered the value of exports even as the volume of international sales shrank.
The merchandise terms of trade, which measures the buying power of the country's exports, rose 5.7% in the fourth quarter after a 1.1% decline in the third quarter, Statistics NZ said.
Seasonally adjusted export volumes fell 5.8%, reflecting declines in the dairy and meat sector but a 14% gain in dairy prices helped limit the drop in the value of exports to just 0.6%, at $11.3 billion. Import volumes were up 1.2%, while values rose a more modest 0.1% to $12.3 billion due to cheaper electrical and mechanical items, including consumer electronics.
"The uptick of dairy export prices lifted New Zealand's terms of trade," business prices manager Sarah Williams said today. "However, dairy export prices are still about a third lower than they were three years ago."
Government data yesterday showed New Zealand's trade deficit widened in January due to the rebound in crude oil imports, from what was a slump in energy prices a year earlier.
Today's figures show New Zealand's terms of trade with China, the country's biggest trading partner, rose 13% in the December quarter, with export prices up 7.7% and import prices down 5%. The volume of exports rose 29% while values were up 39%, due to the pick-up in sales of dairy products, while import volumes increased 6.9% for a 1.6% rise in volumes.
The country's terms of trade were at their highest level since June 2014, when the measure enjoyed a 40-year high during the dairy boom, although it's still 3.7% below that peak.
ASB Bank economist Nathan Penny said the terms of trade were ahead of expectations, reflecting the surge in dairy prices, and that the upside surprise was largely from the fall in import prices.
Indeed, the import price deflation trend remains in play, with six out of the nine categories posting fall," Mr Penny said in a note. "Although, notably, petroleum and petroleum products did post a 0.6% lift over the quarter."
Still, ASB doesn't expect the data will move the Reserve Bank, and the economics team doesn't anticipate a hike in the official cash rate until late 2018.
The services terms of trade rose 2.5% in the fourth quarter.
(BusinessDesk)
