NZ: Q2 terms of trade in focus - Westpac

Research Team at Westpac, suggests that New Zealand’s trade position has weathered the plunge in global dairy prices relatively well, as declines in import prices have provided a powerful offsetting force on the terms of trade.

Key Quotes

“Indeed, in Q1 the terms of trade was boosted by a 4.3% fall in import prices with declines relatively broad-based across oil, food and manufactured goods. As a result, the terms of trade was only 5.7% below 2014’s multi-decade highs.

We estimate that aggregate import prices fell a further 2% in Q2, as weak global inflation and the strengthening NZ dollar offset the rise in oil prices.

However, a slightly larger decline in export prices should have seen the terms of trade edge 0.5% lower in the quarter. We estimate that export prices fell by 2.5%, weighed down by a soft start to the year for dairy prices and the higher NZ dollar. However, substantial growth in export volumes underpinned solid growth in export values in the quarter.”