Fall in Terms of Trade
NZ's terms of trade fall
(Dec 12, 2005)
New Zealand's purchasing power with the rest of the world
slipped in the September quarter due to higher fuel prices and a
weaker currency, weighting on economic growth and the current
account.
Official figures show the terms of trade fell 0.6%, meaning fewer
imports could be bought from every export dollar earned. Import
prices rose 2.5%.
Statistics New Zealand says a weaker NZ dollar in that period also
pushed up import values.
On the other side of the ledger, export prices rose 1.9%, with the
main contributors being higher prices for dairy products and
meat.
But volumes fell for the third consecutive quarter with declines in
milk powder, milk and cheese leading the way.
The decline in the terms of trade was less than expected by
economists, who had forecast a fall of 1.2%.
UBS chief economist Robin Clements says strong world commodity
prices have been insulating exporters from the resurgent kiwi
dollar.
But he says the very strong terms of trade New Zealand has enjoyed
are starting to ebb away.
Clements says the price increase themselves were relatively high as
well, which shows the inflationary pressures that are
present.
Economists say the third quarter is on track for soft GDP growth,
so there's less chance the Reserve Bank will raise interest rates
in January.
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