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Weaker currency helps bolster New Zealand's terms of trade

Xinhua, September 1, 2015 Adjust font size:

Dairy exports drove an unexpected boost the New Zealand's goods terms of trade in the quarter to the end of June, figures from the government statistics agency showed Tuesday.

The merchandise terms of trade, a measure of the quantity of imports the country can buy with a fixed quantity of exports, rose 1.3 percent in the June quarter, due to export prices rising more than import prices, according to Statistics New Zealand.

The latest figures followed a rise of 1.2 percent in the March quarter.

Exported goods prices grew 2.1 percent, with dairy products, which were up 6 percent, contributing the most to the rise.

"Although dairy prices were up in the June quarter, helped by a weaker dollar, they are 28 percent lower than in the March quarter last year," prices manager Chris Pike said in a statement.

"Excluding dairy, export prices fell about 0.1 percent in the June 2015 quarter," he said.

Export dairy prices rose in the June quarter after four straight quarters of decline.

Prices for dairy product exports could be set some time in advance and the global dairy trade index had fallen since March, with significant falls in July and the first half of August, before regaining some ground in mid-August.

Imported goods prices rose 0.7 percent in the June quarter, led by petroleum products, which were up 4.1 percent.

An Economic Note from the ASB Bank forecast that the terms of trade would weaken over the rest of the year, but remain near historically high levels.

However, it warned that the strength of dairy prices in the second quarter would be temporary and there were no signs of inflation.

"In particular, these data highlight that global or imported inflation are missing in action," it said.

It forecast the Reserve Bank of New Zealand would cut the official cash rate, currently at 3 percent, by 50 basis points by the end of the year as it sought to raise inflation to its 1- percent to 3-percent target band. Endi