Terms of trade falls as fuel prices speed away
3 Dec 2018
Terms of trade down 0.5%pa
Export prices increased 8.1% from last September
Import prices rose faster, up 8.5%pa
The key numbers...
- The lower terms of trade highlights New Zealand’s vulnerability to the international market, with higher fuel prices hitting harder than any relief from a lower NZ dollar in the September quarter.
- The lower NZ dollar is masking deteriorating dairy prices internationally. GlobalDairyTrade results currently show a much less rosy picture, and with domestic milk supply growing, we expect prices paid to farmers to decrease.
- Fuel prices have come back significantly from their recent highs, which should dampen future import price growth. However, global trade is still a risk with the US-China trade ructions still simmering.
Terms of trade import and export prices
Annual % change
...and our reaction
- The terms of trade fell 0.5% from last September, the first annual decline since September 2016.
- The NZ dollar shifted lower in the September quarter, down 5.2% against the US dollar. This fall breathed more life into export prices, which rose 8.1%pa. Primary sector commodities, such as dairy and forestry, led this increase, up 9.5% and 8.4% respectively.
- However, higher fuel prices pushed import prices higher, due to petroleum and petroleum product prices rising 53%.