NZ's terms of trade drops 1.9% in 1Q, first fall since September 2016

Containers, container ships and cranes at the Ports of Auckland wharf in the Hauraki Gulf in Auckland. Photo: John Sefton

New Zealand's merchandise terms of trade fell from a record high in the March quarter and broke a five-quarter streak of rises as weaker dairy prices weighed.

The terms of trade, which measures the purchasing power of New Zealand’s exports relative to imports, fell 1.9 percent in the March quarter, after lifting a revised 1.3 percent in the December quarter, Statistics New Zealand said. Economists had expected a 2 percent fall, according to the median in a Bloomberg poll. The fall means New Zealand can buy fewer imports for the same amount of exports.

Export values fell 5.1 percent to $13 billion in the first quarter, made up of a 2.9 percent decline in volumes and a 2.2 percent fall in prices, while the value of imports rose 2.6 percent to $14.9 billion as prices fell 0.3 percent and volumes rose 0.9 percent. The volumes and prices in both cases are seasonally adjusted.

Overall, dairy product export prices fell 6.7 percent in the March 2018 quarter. Dairy product volumes fell 0.6 percent, while price changes drove a 9.8 percent fall in values. This is the largest quarterly fall in dairy product values since the September 2014 quarter, Stats NZ said.

“In the December 2017 quarter we saw increases across dairy product export prices. However, in the March 2018 quarter these increases were almost reversed,” Stats NZ business prices manager Geoffrey Wong said.

Meat export prices fell 2.4 percent, with lamb down 3.1 percent and beef down 2.7 percent. Meat volumes fell 8.8 percent and meat values fell 7.1 percent. Wool prices fell 6.1 percent while volumes fell 23 percent as did values.

On the import side prices were weighed by weaker mechanical machinery prices, down 2.8 percent and a slide in electrical machinery and apparatus prices, down 5.5 percent. Petroleum and petroleum product prices lifted 7.9 percent after rising 21 percent in the prior quarter.