FXStreet (Barcelona) – Mark Smith, Senior Economist at ANZ, reviews the New Zealand terms of trade in Q1, noting that the 1.5% increase in the goods terms of trade in Q1 was in line with market expectations, with the volume splits suggesting a positive net trade contribution to Q1 GDP.
Key Quotes
“The March quarter saw a 1.5% rise in the goods terms of trade, which was in line with the median market expectations of a 1.7% rise. This marked the first quarterly rise since the first half of last year. Nevertheless, the goods terms of trade remains at elevated levels (28% above historical averages), providing support to the economic expansion.”
“Import prices fell 5.1% q/q. The lagged impact of earlier oil price falls appeared to be the key catalyst, with a sharp 29% fall in petroleum prices (-37% y/y), consistent with slumping prices for crude oil. The subsequent rise for oil prices points to a rise in import prices in Q2. Stripping out oil prices a 0.1% rise was seen, with a benign pricing backdrop in place. There were some offsetting rises (mechanical machinery, transport equipment) and falls (food & beverages, plastics).”
“As signalled by earlier movements to export commodity prices, the March quarter showed a 3.7% fall in export prices. Dairy prices fell 6.3% in the quarter, and further falls are in prospect given the close to 30% fall in dairy auction prices since the start of March. Prices for the remainder of the export price basket were down 3.2%, with falls for meat (-4.5%), wool (-4.3%), food & beverages (-3.6%) and aluminium (-2%). Forestry bucked the declining trend, but more recent anecdotes for this sector have been soft.”
“The volume splits suggest a small positive net trade contribution for Q1 GDP. Export volumes rose 1.4% sa in Q1, in line with expectations. There were few signs of a drought impact with only modest falls for dairy volumes (-2.2%), with meat exports up 4.6% in Q1. Forestry products retraced some of their Q4 rise (-4.7%). Non-food manufacturing volumes managed a 3% rise in Q1, with the sector performing well despite the high NZD TWI.”
“Import volumes were flat, with the 0.1% rise the smallest lift since 2012Q4. Sharp falls for capital goods (-18%) and passenger motor cars (-13%) and a 1% fall in intermediate imports were offset by rising consumption goods (+2.3% q/q) suggesting that still high levels of consumer sentiment were being acted upon.”
(Market News Provided by FXstreet)