Increase in Terms Of Trade

Merchandise terms of trade rose in the June 2000 quarter, latest Overseas Trade Indexes released today by Statistics New Zealand show. The 1.2 per cent increase in the merchandise terms of trade, following two quarters of decreases, is due to merchandise export prices rising more than import prices in the latest quarter. In contrast, the services terms of trade fell 0.6 percent this quarter due to service import prices rising and export prices falling slightly. A rise in the terms of trade means that more imports can be funded by a fixed quantity of exports.

The lower New Zealand dollar against the United States and Japanese currencies was one of the main contributors to the rises in most import and export prices. Merchandise export prices, which rose for the fifth consecutive quarter, exceeded the price rise in imports for the first time in three quarters. Also contributing to the export price increase was increased demand and higher world prices for many forestry and dairy products.

The merchandise import price index increased 2.6 per cent in the June 2000 quarter. This was the third consecutive quarterly increase after being relatively flat since the September 1998 quarter. Merchandise import prices continue to be influenced by increasing crude oil prices. If mineral fuels were excluded, the imports price index would have risen 1.8 per cent in the latest quarter.

Seasonally adjusted total import volumes rose 6.9 per cent in the June 2000 quarter. The increase follows a fall of 17.6 per cent last quarter, due to the high December 1999 quarter, which included the frigate HMNZS Te Mana, large aircraft and an increase in imports in anticipation of possible Y2K disruptions. The seasonally adjusted volumes of capital goods (excluding transport equipment) and intermediate goods rose this quarter, but consumption goods fell 1.6 percent following six consecutive quarters of increases.

A seasonally adjusted increase of 2.4 per cent was recorded this quarter in export volumes. Several of the seasonally adjusted export volume indexes recorded decreases this quarter including dairy, meat and fish volumes. The seasonally adjusted non-fuel crude materials index, however, rose by 9.5 per cent this quarter. Increased volumes of forestry products, wool and skins contributed to this increase.

The price indexes for services were relatively flat this quarter with exchange rate movements and rising fuel prices having the most impact on the indexes. Import prices for services rose 0.5 per cent and export prices fell 0.1 per cent.

Ian Ewing DEPUTY GOVERNMENT STATISTICIAN

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