New Zealand's terms of trade surged to a fresh 40-year high in the December quarter and are now tantalisingly close to all-time highs.
Statistics New Zealand said today that the merchandise terms of trade rose 2.3% in the quarter, the fourth consecutive rise, pushing to the highest level since the December 1973 quarter and just 3.5% below the all-time peak in June 1973.
Terms of trade is a measure of the purchasing power of New Zealand's exports abroad. An increase means that New Zealand can buy more imports for the same amount of exports. So in other words the latest rise meant that 2.3% more imported goods could be funded by a fixed quantity of exported goods than in the September 2013 quarter.
Stats NZ said in the December 2013 quarter, seasonally adjusted dairy export values rose 27%. Dairy volumes, after adjusting for seasonal effects, rose 23% while actual prices fell 1.1%.
Total export volumes rose 9.7% in the December 2013 quarter while total export prices fell 0.5%. Both movements were strongly influenced by dairy, which accounted for 39% of the value of goods exported in the December quarter – twice as much as meat and forestry combined.
"Export volumes are at their highest level since the series began in 1990, reflecting higher dairy volumes in the December quarter, after adjusting for seasonal effects," Stats NZ's prices manager Chris Pike said. "Dairy export prices fell slightly, reflecting a stronger New Zealand dollar."
Import prices fell 2.8% in the December 2013 quarter. The fall was broadly based, due to the stronger New Zealand dollar. An exception was petroleum and petroleum products, which rose 0.1%.
In the December 2013 quarter, the Reserve Bank's trade weighted index, measuring the Kiwi dollar against a basket of trading partner currencies, rose 2.7%, which had a downward effect on export and import prices.
Total import volumes were unchanged, with a fall in capital goods offset by rises in the other categories.
The price and volume indexes for exports and imports of goods are compiled mainly from overseas merchandise trade data.