New Zealand’s terms of trade for goods was up 4.4% in the first quarter of 2016, as compared with consensus projection of 1% q/q. This was the first gain after two straight quarterly falls; however, the index is still lower than June 2014’s peak of 5.8%. Import prices in NZD value dropped 4.3% q/q. The decline was mainly because of lower oil prices. Petroleum and petroleum products’ prices fell 24% in the first quarter, after a decline of 25% in Q4 2015. Stripping petroleum products, prices of imports declined 1.4% in Q1, with broad-based declines apart from a rise in textiles.
Export prices in NZD terms remained flat in the first quarter. The decline of 2% in the NZD trade-weighted index underpinned local returns. NZD prices were mixed, with recovering dairy prices, rise in forestry prices, fish, non-food crude materials, but decline in prices for food, meat, beverages and wool.
The increase in the first quarter terms of trade seems to be temporary, according to ANZ. There has been a sharp recovery in the oil prices from their lower levels recorded in early 2016, while the dairy prices have performed weakly in recent times. The effect of recent weakness in price of export commodity is still expected to witness a drop in terms of trade in 2016. The terms of trade is likely to decline by 5% over 2016, said ANZ in a research report. According to the associated volume data, exports dropped 2.7% on a sequential basis, whereas imports declined 0.7%.
