Saturday, March 30, 2024

NZ export purchasing power tumbles

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The international purchasing power of New Zealand’s export industries fell the most in a decade as milk prices soured and the Kiwi dollar pushed higher.
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The terms of trade, which measures that purchasing power, fell 4.7% in the September quarter.

Export prices fell 8.3% from their record level in June. It was the third-largest fall in export prices since the series began.

Import prices dropped a more sedate 3.7%.

“The New Zealand dollar rebounded from a fall last quarter, which has had a downwards influence on both export and import prices,” business prices manager Bryan Downes said.

The trade-weighted index rose 3.4% in the quarter, while the NZ-US exchange rate rose 7.2% during the same period.

“Export prices for dairy products fell 12% overall in the quarter,” Downes said.

He says while Global Dairy Trade (GDT) prices rose in the same period, GDT only represents a proportion of the dairy products exported by NZ, he said.

BNZ senior economist Doug Steel, however, says softer dairy prices in the terms of trade were “essentially catching up to previous weakness that we saw on GDT.”

“GDT is pricing forward sales, so those prices take some time to show up in the official data,” he said.

“Also note that GDT pricing is in US dollars, while the terms of trade data is in NZ dollars so the latter will be restricted by the lift in the NZ dollar.”

Dairy prices rose 4.6% in the GDT auction overnight and built on a 1.8% lift in the prior auction.

“Dairy values have been the most affected with a 16% drop in the quarter compared with a 3.3% fall in dairy volumes exported,” Downes said.

Also contributing to the fall in export prices were lower forest products prices, which fell 11% following an 11% rise in the June quarter. Forestry export volumes rose 27% in the September quarter.

Meat prices also fell 8.8% in the quarter with beef prices down 7.4% and lamb prices down 10%.

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