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

Terms of trade

The merchandise terms of trade fell 0.5 percent in the June 2008 quarter due to import prices (up 4.8 percent) rising more than export prices (up 4.4 percent). The fall followed six consecutive quarterly rises. Despite the latest fall, the terms of trade is still at its second-highest level since the March 1974 quarter. On an annual basis, the merchandise terms of trade rose 10.6 percent in the year to the June 2008 quarter, compared with smaller rises of 2.3 percent in the year to the June 2007 quarter, and 0.5 percent in the year to the June 2006 quarter.

The quarterly decrease in the merchandise terms of trade means that in the June 2008 quarter, 0.5 percent less merchandise imports could be funded by a fixed quantity of merchandise exports than in the March 2008 quarter.

The terms of trade for services fell 3.4 percent in the June 2008 quarter. This is the first decrease since a 0.5 percent fall in the September 2006 quarter. The fall in the latest quarter resulted from services import prices (up 4.9 percent) rising more than export prices (up 1.3 percent). In the year to the June 2008 quarter, the services terms of trade rose 1.3 percent, compared with a 10.3 percent rise in the year to the June 2007 quarter, and a 6.1 percent fall in the year to the June 2006 quarter.

Merchandise export prices

The merchandise export price index rose 4.4 percent in the June 2008 quarter, following a 4.5 percent rise in the March 2008 quarter. The rise was mainly driven by higher prices for food and beverages, particularly meat, as well as higher prices for petroleum and petroleum products.

The food and beverages index rose 3.8 percent in the June 2008 quarter. This followed increases of 6.7 percent in the March 2008 quarter and 8.0 percent in the December 2007 quarter. The latest increase was mainly driven by the rise for meat (up 8.2 percent). Other contributors included whole milk powder, fruit and vegetables, cheese, and fish.

In the year to the June 2008 quarter, the food and beverages index recorded the highest-ever annual increase (up 28.1 percent) since the series began in the September 1971 quarter. In the year to the June 2007 quarter, the index fell 6.1 percent.

The meat index rose 8.2 percent in the June 2008 quarter. This follows a flat movement in the March 2008 quarter (down 0.3 percent), and a 2.6 percent rise in the December 2007 quarter. In the latest quarter, prices for beef and veal rose 12.4 percent, while lamb, hogget and mutton prices rose 5.2 percent.

Despite rises for some dairy products, the dairy products index itself recorded a marginal decline (down 0.7 percent ) in the June 2008 quarter, the first fall since the December 2006 quarter. The major contribution came from skimmed and butter milk powder (down 19.8 percent), with some offsetting impact from increases for whole milk powder (up 5.4 percent) and cheese (up 6.1 percent). In the year to the June 2008 quarter, the dairy products index rose 56.8 percent, compared with a fall of 4.0 percent in the year to the June 2007 quarter.

Another key contribution to the total export price index came from the petroleum and petroleum products index (up 28.8 percent), gathering momentum from increased international prices and a depreciating New Zealand dollar. The latest quarterly rise in this index was the third consecutive increase and the highest since a 29.5 percent rise in the September 1999 quarter. In the year to the June 2008 quarter, the petroleum and petroleum products index rose 45.8 percent, compared with a 10.8 percent fall in the year to the June 2007 quarter.

The non-food manufactured goods index rose 2.4 percent in the June 2008 quarter. This followed increases of 1.4 percent in the March 2008 quarter, and 3.0 percent in the December 2007 quarter. The main contributor to this rise came from aluminium (up 14.5 percent), which recorded its first increase since the March 2007 quarter. Among other key contributors to the non-food manufactured goods index was casein (up 11.7 percent). In the year to the June 2008 quarter, the non-food manufactured goods index rose 7.0 percent, compared with a 6.6 percent fall in the year to the June 2007 quarter.

On an annual basis, the merchandise export price index rose 18.8 percent in the year to the June 2008 quarter, the highest increase since a 20.5 percent rise in the year to the March 2001 quarter. This followed a fall of 5.8 percent in the year to the June 2007 quarter, and a 13.2 percent rise in the year to the June 2006 quarter.

Merchandise import prices

The merchandise import price index rose 4.8 percent in the June 2008 quarter, following rises of 0.3 percent in the March 2008 quarter, and 2.5 percent in the December 2007 quarter. The rise in the import price index in the latest quarter was largely driven by higher prices for petroleum and petroleum products.

The petroleum and petroleum products index rose 17.7 percent in the June 2008 quarter, the largest rise since a 19.9 percent rise in the June 2006 quarter. This index was driven up by higher prices for crude oil (up 17.9 percent), along with significant price rises for automotive diesel, motor spirit and kerosene-type jet fuel. In the year to the June 2008 quarter, the petroleum and petroleum products index rose 51.0 percent, compared with a 15.3 percent fall in the year to the June 2007 quarter, and a 47.2 percent rise in the year to the June 2006 quarter.

When petroleum and petroleum products are excluded from the total imports index, the movement in the June 2008 quarter is a rise of 2.5 percent.

Non-fuel crude materials (up 24.9 percent) also made a significant contribution to the rise in the total imports index. The latest quarterly rise in this index is the largest since a 26.8 percent rise in the March 1975 quarter. Driving up this index were significant price rises for key fertiliser ingredients (such as natural calcium phosphates and sulphur), aluminium oxide, and vegetable oils. In the year to the June 2008 quarter, the non-fuel crude materials index rose 36.7 percent, compared with a 4.2 percent fall in the year to the June 2007 quarter.

The food and beverages index rose 4.9 percent in the June 2008 quarter, following little change in the March 2008 quarter (up 0.1 percent) and a 4.7 percent rise in the December 2007 quarter. Subgroups driving up the food and beverages index included cereals and cereal preparations (up 8.8 percent), and fruit and vegetables (up 3.9 percent). In the year to the June 2008 quarter, the food and beverages index rose 11.1 percent, compared with a 2.3 percent fall in the year to the June 2007 quarter.

Making a very small downward contribution to the overall rise in total import prices was the mechanical machinery index (down 1.0 percent). This index has been falling since the September 2006 quarter. Lower prices for computers and computer equipment were the main drivers of the fall in the June 2008 quarter. In the year to the June 2008 quarter, the mechanical machinery index fell 10.5 percent, compared with a 16.2 percent fall in the year to the June 2007 quarter.

On an annual basis, the total imports price index rose 7.5 percent, compared with a 7.9 percent fall in the year to the June 2007 quarter, and a 12.6 percent rise in the year to the June 2006 quarter.

 

In the June 2008 quarter, two of the three main broad economic categories showed price rises. The 9.7 percent rise in the intermediate goods index made the largest contribution to the overall 4.8 percent rise in total import prices.

The intermediate goods index rose 9.7 percent in the June 2008 quarter, following rises of 2.5 percent in the March 2008 quarter and 4.2 percent in the December 2007 quarter. All the subgroups within the intermediate goods index rose in the latest quarter. The largest contribution came from the primary fuels and lubricants subgroup (up 17.8 percent), which was mainly driven by crude oil prices. A noteworthy movement was the 55.5 percent rise in the primary industrial supplies subgroup, which includes natural calcium phosphates and sulphur. This was the largest quarterly rise since this series began in the September 1982 quarter.

Making a much smaller contribution to the overall rise in total import prices was the consumption goods index (up 1.9 percent). The major driver of this rise was the processed food and beverages subgroup (up 4.8 percent), with the durable consumer goods index (down 1.8 percent) having a minor offsetting effect.

The capital goods index fell 0.6 percent in the June 2008 quarter, following falls of 2.5 percent and 0.5 percent in the March 2008 and December 2007 quarters, respectively. The main contribution came from the non-transport equipment sub-index (down 1.0 percent).

Services export prices

Services export prices rose 1.3 percent in the June 2008 quarter, following rises of 1.4 percent in the March 2008 quarter, and 1.8 percent in the December 2007 quarter. All the published services export indexes rose this quarter. The transportation index (up 2.6 percent) was the largest contributor to the increase in the export services index. The rise in the transportation index was mainly driven by air transportation services, as a result of higher fuel prices.

In the year to the June 2008 quarter, the services export price index rose 6.0 percent, the highest increase since the 6.1 percent rise in the year to the June 2001 quarter. The latest increase compares with rises of 0.8 percent in the year to the June 2007 quarter, and 5.3 percent in the year to the June 2006 quarter.

Services import prices

Services import prices rose 4.9 percent in the June 2008 quarter, following two consecutive decreases of 0.8 percent each in the March 2008 and December 2007 quarters. All the published services import indexes rose in the latest quarter. The travel index (up 6.9 percent) was the main contributor to the overall rise in services import prices. This rise was mainly driven by the personal travel sub-index, due to higher prices for travel and accommodation overseas, coupled with the depreciation of the New Zealand dollar.

In the year to the June 2008 quarter, the services import price index rose 4.6 percent. This compares with a fall of 8.6 percent in the year to the June 2007 quarter, and a 12.1 percent rise in the year to the June 2006 quarter.

Exchange rate movements

According to the exchange rates published by the Reserve Bank of New Zealand, in the trade weighted index (TWI) the New Zealand dollar fell 3.7 percent in the June 2008 quarter. In this quarter, the New Zealand dollar depreciated against all major trading partner currencies, but with much larger depreciations against the Australian dollar and the euro.

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) each fortnight. These exchange rates are prepared 11 days prior to 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 June 2008 quarter, the NZCS TWI reported a 1.9 percent decrease, with the New Zealand dollar falling against three of the five major currencies traded in, but not against the UK pound and the US dollar. Depreciation of the New Zealand dollar against some 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.

Revision of December 2007 quarter indexes

Import data for the December 2007 quarter was recalculated after an isolated error was identified with one of the surveyed prices included in the calculation of final figures published on 11 June 2008. The recalculation of the December data resulted in the revision of the following series:

• Merchandise terms of trade index (OTPQ.STTZZ5)
• Total imports (OTPQ.SIA1I91)
• Non-food manufactured goods (OTPQ.SIA1MG1)
• Total parts and accessories of capital goods and transport equipment (OTPQ.SIB1PO1)
• Total intermediate goods (OTPQ.SIB1PP1)

The revised index figures tend to align with the figures that were provided as provisional in the Overseas Trade Indexes (Prices): December 2007 quarter (Provisional) Hot Off The Press published on 11 March 2008.

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. Please note that the revisions to the December 2007 quarter indexes flowed through to the March 2008 quarter final figures in terms of their level.

For technical information contact:
Mark Gordon or Suchindra Nanayakkara
Wellington 04 931 4600
Email: info@stats.govt.nz  

Next release ...

Overseas Trade Indexes (Prices): September 2008 quarter (provisional)
and
Overseas Trade Indexes (Volumes): September 2008 quarter (provisional)
will both be released on 10 December 2008.