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Michael Gordon, analyst at Westpac, points out that the New Zealand’s terms of trade fell by 3% in the December quarter, but suggests that this decline is likely to be short-lived.

Key Quotes

“Export prices fell by 1.7%, broadly in line with our forecast. Dairy prices fell 5.7%, though that followed a 6.2% rise in the previous quarter. Recent dairy auctions have seen a strong lift in prices, which will help to boost the export figures over the March and June quarters.”

“Import prices rose by 1.4%, against our forecast of a 1.5% fall. The main surprise was a reported 7.5% rise in fuel import prices, which came at a time when world oil prices were falling sharply. We suspect that this result will either be revised away or will be sharply reversed in the March quarter figures.”

“Export volumes rose by 0.8% while import volumes rose by 0.2%, indicating a small positive contribution to GDP growth in the December quarter.”