New Zealand’s Q4 terms of trade fall below expectations on drop in commodity prices and stronger dollar

New Zealand's Q4 terms of trade declined 2%, slightly below the expectations of 1% decline. A stronger New Zealand dollar and a decline in global commodity prices were a drag on the trade. During the quarter export prices declined 5.7%, mainly due to falling dairy prices that dropped 12.8%. Other categories posted mixed results. Manufactured goods fell 4%.

Meanwhile, import prices declined 3.7%, mainly due to the 25% decline in petroleum products that account for 10% of New Zealand's import bill. Prices for food and manufactured goods were also slightly low. The decline in global oil prices has countered the downturn in dairy price. The overall terms of trade is 10% lower from its peak in 2014, but it is still at the same levels to the earlier peaks reached in the 2008 and 2011 cycles.

Export volumes of New Zealand for Q4 declined 2.4%, after it increased 3.3% in Q3. Export volumes increase for meat, while it remained almost flat for dairy. However, it decreased throughout most other categories. Meanwhile, import volumes increased 0.7%, driven by an increase of 4.4% in machinery.