NZ: Weaker terms of trade - Westpac

Michael Gordon, analyst at Westpac, points out that the New Zealand’s terms of trade fell by 3% in the December quarter, but suggests that this decline is likely to be short-lived.

Key Quotes

“Export prices fell by 1.7%, broadly in line with our forecast. Dairy prices fell 5.7%, though that followed a 6.2% rise in the previous quarter. Recent dairy auctions have seen a strong lift in prices, which will help to boost the export figures over the March and June quarters.”

“Import prices rose by 1.4%, against our forecast of a 1.5% fall. The main surprise was a reported 7.5% rise in fuel import prices, which came at a time when world oil prices were falling sharply. We suspect that this result will either be revised away or will be sharply reversed in the March quarter figures.”

“Export volumes rose by 0.8% while import volumes rose by 0.2%, indicating a small positive contribution to GDP growth in the December quarter.”