next report will resume on 12 january 2009
New Zealand’s terms of trade fell 2.3% in the September quarter, the second decline after reaching a 34-year high in March.
The darkening outlook for the global economy has seen world commodity prices fall sharply in recent months but, through an accident of timing, they remained higher on average through Q3 than in Q2.
While the fall in the terms of trade was in line with our forecasts, the weaker exchange rate had a much larger impact than we expected on both sides of the ledger. Export prices rose 8.6%, with meat, fish and aluminium recording double-digit gains. Even dairy prices rose another 7.4% to a new high – the terms of trade reflects the contracted prices paid to Fonterra, which lagged the run-up in spot prices and will be equally slow to reflect the decline.
Meanwhile, import prices rose by 11.1% – the largest quarterly increase in 24 years – led by a 31% rise for petroleum products, and sharp increases for items such as fertiliser (+67%) and iron and steel (+26%). This is not entirely a new story, since we know that annual consumer price inflation reached a peak of 5.1% in this quarter.
But it underscores the fact that some importers have had to absorb a lot of pain in the last year.
