Overseas Trade Indexes (Prices): December 2008 quarter (provisional)

Terms of trade

In the December 2008 quarter, the merchandise terms of trade fell 0.9 percent. This was due to import prices (up 3.4 percent) rising more than export prices (up 2.5 percent). This quarter’s fall was the third consecutive fall, including a 0.9 percent fall in the September 2008 quarter. Despite the quarterly fall, in the year to the December 2008 quarter, the merchandise terms of trade index increased 1.9 percent. This increase followed an 8.8 percent increase in the year to the December 2007 quarter.

The latest fall in the merchandise terms of trade means that in the December 2008 quarter, 0.9 percent less merchandise imports could be funded by a fixed quantity of merchandise exports than in the September 2008 quarter.

The terms of trade for services fell 6.5 percent in the December 2008 quarter, which was the largest fall since the series began in the June 1997 quarter. The latest fall followed falls of 4.9 percent and 3.4 percent in the September 2008 and June 2008 quarters, respectively. The fall in the latest quarter was due to services import prices (up 10.2 percent) rising more than export prices (up 3.1 percent). On an annual basis, in the year to the December 2008 quarter, the services terms of trade decreased 12.2 percent, compared with an increase of 8.9 percent in the year to the December 2007 quarter. The latest annual movement was the largest decrease since the series began.

Merchandise export prices

The merchandise export price index rose 2.5 percent in the December 2008 quarter. This followed rises of 8.6 percent and 4.5 percent in the September 2008 and June 2008 quarters, respectively. In the December 2008 quarter, all published export indexes recorded rises, except aluminium. The depreciation of the New Zealand dollar against major trading partners’ currencies was the main driver of the overall rise in export prices. The Reserve Bank's trade weighted index (TWI) fell 11.8 percent for the December 2008 quarter.

In the December 2008 quarter, the most significant contribution to the overall rise in merchandise export prices came from a 6.5 percent rise in food and beverages. This latest rise was the sixth consecutive quarterly rise, following a rise of 8.4 percent in the September 2008 quarter. Driving up food and beverages were rises in dairy product prices (up 5.8 percent) and meat prices (up 4.9 percent). Prices for lamb, hogget and mutton (up 11.6 percent) significantly contributed to the rise in the meat price index which was offset by a fall in beef and veal (down 2.2 percent). In the year to the December 2008 quarter, the food and beverages index increased 28.2 percent, compared with increases of 15.6 percent in the year to the December 2007 quarter, and 4.9 percent in the year to the December 2006 quarter.

The dairy products index rose 5.8 percent in the December 2008 quarter, following a rise of 7.4 percent in the September 2008 quarter and a slight fall of 0.2 percent in the June 2008 quarter. Prices for cheese (up 10.4 percent), butter (up 9.3 percent), and skim milk powder (up 8.9 percent) were the main drivers of the rise in dairy product prices. These rises were partly offset by a fall in whole milk powder prices (down 2.6 percent). On an annual basis, the dairy products index increased 35.7 percent in the year to the December 2008 quarter, following an increase of 40.4 percent in the year to the December 2007 quarter and a decrease of 4.1 percent in the year to the December 2006 quarter.

Prices for forestry products (up 11.2 percent) rose in the December 2008 quarter, significantly contributing to the overall rise in export prices. This was the largest quarterly rise since a rise of 14.8 percent in the June 1993 quarter. Higher prices for pinus radiata logs and chips were the main drivers of the latest quarterly rise, while lower prices for chemical wood pulp had an offset influence. In the year to the December 2008 quarter, forestry product prices increased 20.0 percent, compared with a decrease of 2.3 percent in the year to the December 2007 quarter.

The petroleum and petroleum products index (down 31.6 percent) made the most significant downward contribution to the overall rise in export prices in the December 2008 quarter. This fall was the largest quarterly fall since a fall of 45.7 percent in the June 1986 quarter. The latest fall compared with rises of 8.5 percent and 28.8 percent in the September 2008 and June 2008 quarters, respectively. The fall in the latest quarter was driven by lower export prices for crude oil. In the year to the December 2008 quarter, the petroleum and petroleum products index fell 2.4 percent, compared with rises of 23.9 percent and 10.0 percent in the years to the December 2007 and 2006 quarters, respectively.

On an annual basis, the merchandise export price index increased 21.4 percent in the year to the December 2008 quarter, compared with increases of 7.3 percent in the year to the December 2007 quarter, and 8.3 percent in the year to the December 2006 quarter.

Merchandise import prices

The merchandise import price index rose 3.4 percent in the December 2008 quarter, following rises of 9.6 percent in the September 2008 quarter and 4.9 percent in the June 2008 quarter. The rise in the import price index in the latest quarter was partly driven by higher prices for mechanical machinery. The depreciation of the New Zealand dollar made a significant contribution to the rise in total import prices this quarter. However, the fall in prices for petroleum and petroleum products (down 22.4 percent) largely offset this rise.

The most significant contributor to the latest quarterly rise in import prices was the mechanical machinery index (up 18.3 percent), following a rise of 5.9 percent in the September 2008 quarter and a fall of 1.0 percent in the June 2008 quarter. The latest rise was the largest quarterly rise for this index since the series began in the March 1971 quarter. Price rises for computers and machinery parts contributed to this increase. (The method used to measure price change for imported computers is to use United States computer-related producer price indexes as a proxy. The United States indexes are exchange-rate adjusted, and the depreciation of the New Zealand dollar against the United States dollar in the December 2008 quarter impacted significantly on the rise in computer prices.) In the year to the December 2008 quarter, the mechanical machinery index increased 18.4 percent, compared with a decrease of 13.3 percent in the year to the December 2007 quarter and a decrease of 1.8 percent in the year to the December 2006 quarter.

Another significant contributor to the rise in import prices was the transport equipment index, which rose by 8.7 percent in the December 2008 quarter. This rise is the largest quarterly rise for this index since a 9.3 percent rise in the December 1991 quarter. The latest quarterly rise follows a 2.8 percent rise in the September 2008 quarter and a 0.1 percent fall in the June 2008 quarter. Price rises for aircraft and motor vehicles contributed to this rise. In the year to the December 2008 quarter, the transportation equipment index increased 9.7 percent, compared with a 2.9 percent decrease in the year to the December 2007 quarter, and a 5.2 percent increase in the year to the December 2006 quarter. The latest annual increase was also the largest increase for this index since a 10.0 percent increase in the year to the September 2000 quarter.

The electrical machinery index rose 8.0 percent in the December 2008 quarter, following a 3.3 percent rise in the September 2008 quarter and a 0.6 percent rise in the June 2008 quarter. The latest rise was the largest for the electrical machinery index since the March 2000 quarter. Price rises for TV sets contributed to the rise for this index. In the year to the December 2008 quarter, the electrical machinery index increased 8.3 percent, compared with a 10.2 percent decrease in the year to the December 2007 quarter and a 3.2 percent decrease in the year to the December 2006 quarter. The latest annual increase is the largest since a 13.6 percent increase in the year to the December 2000 quarter.

After six consecutive quarterly rises since the June 2007 quarter, the petroleum and petroleum products index fell 22.4 percent in the December 2008 quarter. This is the largest fall since a 25.9 percent fall in the June 1986 quarter. The latest quarterly fall follows rises of 21.0 percent in the September 2008 quarter and 17.8 percent in the June 2008 quarter. The fall in the latest quarter was largely driven by a drop in prices for crude oil (down 29.3 percent), along with significant drops for automotive diesel, petrol and kerosene-type jet fuel. In the year to the December 2008 quarter, the petroleum and petroleum products index increased 19.7 percent, compared with a 20.1 percent increase in the year to the December 2007 quarter and a 4.7 percent increase in the year to the December 2006 quarter.

When petroleum and petroleum products are excluded from the total imports index, the movement in the December 2008 quarter is a rise of 9.7 percent.

In the year to the December 2008 quarter, the total imports price index increased 19.2 percent, compared with a 1.4 percent decrease in the year to the December 2007 quarter, and a 4.4 percent increase in the year to the December 2006 quarter.

In the December 2008 quarter, two of the three main broad economic categories showed price rises. The capital goods index made the largest contribution to the overall 3.4 percent rise in total import prices this quarter.

The capital goods index rose 13.7 percent in the December 2008 quarter, following a rise of 4.7 percent and a fall of 0.6 percent in the September 2008 and June 2008 quarters, respectively. The latest rise is the largest quarterly rise for this index since the series began in the September 1989 quarter. The main contribution to the capital goods index came from the non-transport equipment sub-index (up 13.8 percent), which was mainly driven up by the prices of computers and mechanical shovels.

The consumption goods index (up 5.9 percent in the December 2008 quarter) also contributed to the overall rise in import prices. This followed a 7.0 percent rise in the September 2008 quarter and a 1.9 percent rise in the June 2008 quarter. The major driver of this rise was the semi-durable consumer goods sub-index (up 14.6 percent).

The intermediate goods index fell 1.0 percent in the December 2008 quarter, following a 14.5 percent rise in the September 2008 quarter and a 9.8 percent rise in the June 2008 quarter. The largest contribution to this latest fall came from the primary fuels and lubricants subgroup, which fell 29.1 percent. This was mainly driven by lower crude oil prices. The processed industrial supplies sub-index (up 9.3 percent) made an offset contribution to the fall in the intermediate goods index. Fertilisers had a major contribution to the rise in this sub-index.

Services export prices

Services export prices rose 3.1 percent in the December 2008 quarter, the highest quarterly rise since a 4.8 percent increase in the December 2000 quarter. The latest rise follows rises of 2.6 percent and 1.3 percent in the September 2008 and June 2008 quarters, respectively. Three of four published services export indexes rose in the latest quarter. The transportation index (up 8.9 percent) was the largest contributor to the increase in the export services index. The rise in the transportation index was primarily driven by the air transportation sub-index, with respondents citing increased fuel costs, change in seasons and the depreciation of the New Zealand dollar.

In the year to the December 2008 quarter, the services export price index increased 8.6 percent, compared with an increase of 3.5 percent in the year to the December 2007 quarter. The latest annual movement was the largest increase since the series began in the June 1997 quarter.

Services import prices

In the December 2008 quarter, services import prices rose 10.2 percent, following rises of 7.9 percent and 4.9 percent in the September 2008 and June 2008 quarters, respectively. The rise in the latest quarter was the largest recorded since the series began in the June 1997 quarter. All the published services import indexes rose in the latest quarter. The transportation index (up 13.7 percent) made the most significant contribution to the overall rise in services import prices. This rise was mainly influenced by the sea transportation sub-index, as a result of rising sea freight prices.

In the year from the December 2007 quarter to the December 2008 quarter, the services import price index increased 23.7 percent, compared with a decrease of 4.9 percent in the year to the December 2007 quarter. The latest annual increase was the largest recorded since the series began.

Exchange rate movements

According to the exchange rates published by the Reserve Bank of New Zealand, the trade weighted index (TWI) of the New Zealand dollar fell 11.8 percent in the December 2008 quarter. In this quarter, the New Zealand dollar depreciated against all major trading partners’ currencies excluding the Australian dollar, but the greatest depreciation was against the Japanese yen (down 27.2 percent).

Exchange rates used in the calculation of merchandise import values differ from the weekly exchange rates used in the calculation of merchandise export values. Import values are converted from foreign currencies using exchange rates set by the New Zealand Customs Service (NZCS) every two weeks. These exchange rates are prepared 11 days before the effective date and are then applied for two weeks. Therefore, the NZCS rates of exchange lag from 11 to 25 days compared with exchange rates published by the Reserve Bank.

For the December 2008 quarter, the NZCS TWI recorded an 8.8 percent fall, with the New Zealand dollar falling against four of the five major currencies traded, except the Australian dollar. The depreciation of the New Zealand dollar against key currencies has an upward influence on both import and export prices in New Zealand dollars. The impact on the terms of trade depends on the relative mix of exports and imports for each currency.

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Updates to previously published material

The overseas merchandise trade indexes are provisional for one quarter to allow for receipt and editing of late and amended trade documentation.

For the September 2008 quarter, the final merchandise import price index number was 14 index points lower than the provisional index number. This was due to a change in price movement for crude oil (up 38.4 percent in the provisional to up 20.5 percent in the final). The September 2008 quarter final increase was calculated using crude oil imports from a greater range of countries than was used for the provisional index.

For technical information contact:
Stephanie Ye or Dylan Xu
Wellington 04 931 4600
Email: info@stats.govt.nz

Next release ...

Overseas Trade Indexes (Prices): March 2009 quarter (provisional) and Overseas Trade Indexes (Volumes): March 2009 quarter (provisional) will both be released on 10 June 2009.