Rise in terms of trade

Embargoed until 10:45am – 11 December 2007

Rise in terms of trade

The merchandise terms of trade rose 3.6 percent in the September 2007 quarter,due to export prices rising and import prices falling,Statistics New Zealand said today.The terms of trade index is now at its highest level since the March 1974 quarter.

A higher terms of trade means that for every dollar of exports sold,a larger volume of imports can be purchased. The 3.3 percent rise in the merchandise export price index in the September 2007 quarter was largely driven by a 16.9 percent rise in the dairy products index.Price rises were recorded for milk and cream, butter and cheese.

The latest quarterly rise in the dairy products index is the largest since the June 1989 quarter. Seasonally adjusted merchandise export volumes fell 1.0 percent in the September 2007 quarter following two consecutive quarters of increases.A 15.2 percent fall in the dairy products index was the main contributor to the fall this quarter.

Whole milk powder was the commodity to contribute the most to the fall in the dairy products index,and has been decreasing since the March 2007 quarter.The fall in total exports was partially offset by a 79.8 percent rise in the petroleum and petroleum products index.Crude oil was the main commodity to increase this quarter with the first full months of production from the Tui oilfield in August and September.

The merchandise import price index fell 0.3 percent in the September 2007 quarter,following three consecutive quarterly falls.The main contributions came from falls for electrical machinery and apparatus (down 6.1 percent),mechanical machinery (down 3.6 percent)and transport equipment (down 1.7 percent).

However,the 10.1 percent rise for petroleum and petroleum products largely offset the overall fall in import prices.

Seasonally adjusted merchandise import volumes rose 0.3 percent in the September 2007 quarter,the fifth consecutive quarterly rise.Higher volumes of intermediate goods and consumption goods this quarter contributed the most to the increase in total imports.

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