Terms Of Trade Recovering But Export Volumes Fall In Q2

NZ saw the second consecutive quarterly improvement in its merchandise terms of trade in Q2. It rose 2.1% q/q to be down 1.7% y/y after a trough of -10.7% y/y in Q4 2023, but there was a sharp deterioration in the services terms of trade of 8.6% q/q and 5.7% y/y. Net exports of goods are likely to weigh on Q2 GDP.

• Goods export prices rose 5.2% q/q driven by an 8% q/q rise in dairy, which is now up 0.3% y/y, the first positive in over a year. Import prices also rose but by less posting a 3.1% q/q increase to be up 0.7% y/y.
• Imported consumer inflation picked up again rising 1.4% q/q to 4% y/y up from 3.3% y/y in Q1 and the recent trough of 2.4% y/y in Q4 2023. While the disinflationary impact from goods prices seems to be past, price increases are still low compared to most of the post-Covid period.
• The services terms of trade fell 8.6% q/q and -5.7% y/y in Q2 due to services import prices rising 6.2% q/q but export prices falling 2.9% q/q.
• NZ Q2 GDP prints on September 19. So far it is looking weak with Q2 retail sales volumes down 1.2% q/q and Q2 merchandise export volumes decreasing 4.3% q/q while imports rose 3.1% q/q signalling a negative contribution from net exports of goods. We don’t have services yet. The RBNZ is forecasting a 0.5% q/q contraction in GDP.

Source: MNI - Market News/Refinitiv