Terms of trade drops 3%

Due to lower export prices, and rising import prices, the terms of trade fell 3.0 per cent in the December quarter, the biggest fall since the September 2015 quarter, according to Stats NZ's latest figures. 

Terms of trade measure the purchasing power of New Zealand’s exports abroad and is an indicator of the state of the overall economy.

Import prices rose 1.4 per cent in the December 2018 quarter, driven mainly by crude oil, diesel, and petrol prices; petroleum and petroleum product prices rose 7.5 per cent overall. 

Import movements in the motor vehicle industry also helped with the rise in import prices. Motor vehicle prices increased by 0.6 per cent since the September 2018 quarter.

Despite this rise, import movements in the motor vehicle industry brought import prices down, with a 3.1 per cent decrease compared to the previous quarter ending in June 2018.

“Petroleum product prices have increased for the last five quarters. Prices for crude oil, diesel, and petrol were all up in the December quarter – 10 per cent, 4.5 per cent, and 3.9 per cent, respectively,” business prices delivery manager Sarah Johnson said.

Export prices fell 1.7 per cent during the December 2018 quarter. Prices for milk powder, a key export, fell 6.2 per cent; butter prices also fell from their recent high levels.