Oil and logs defy falling trade prices

Prices for oil and logs rose sharply in the March 2021 quarter, while import and export prices continued to fall overall, Stats NZ said today.

Overseas trade index (OTI) import and export prices both fell 0.8 percent in the quarter to March 2021. Prices remained well below those recorded a year ago, with annual falls of 6.3 percent for imports and 7.2 percent for exports.

Terms of trade rose 0.1 percent in the March 2021 quarter but remained down 0.9 percent annually. The terms of trade measures the purchasing power of New Zealand's exports abroad and is an indicator of the overall state of the economy. A rise in the terms of trade means New Zealand can buy more imports for the same amount of exports.

Falling import prices were led by electrical machinery and apparatus, down 6.1 percent on the quarter, while falling export prices reflected price decreases for dairy products (down 2.4 percent) and meat (down 1.5 percent).

"Although commentators are predicting rising inflation as the global economy recovers from the COVID-19 pandemic, we're not yet seeing that reflected in our headline OTI figures," business prices delivery manager Bryan Downes said.

"Instead, we've seen modest declines across most goods categories, offset by strong growth in prices for particular commodities, including oil and logs."

Strong growth in oil and log prices

Import prices for petroleum and petroleum products rose 13.8 percent in the March 2021 quarter, as COVID-19 restrictions have eased around the world. However, prices remain well below pre-COVID-19 levels, down 30.3 percent in the year to the March 2021 quarter.

"The recovery in oil prices, globally, reflects increasing demand as economies emerge from lockdowns and travel restrictions, as well as tightening supply due to reduced oil production," Mr Downes said.

Export prices for forestry products rose 7.0 percent in the March 2021 quarter. Within that category, prices for wood exports rose 9.1 percent over the quarter to reach the highest prices on record, slightly exceeding the previous peak in the June 2020 quarter.

"Strong international demand for logs, especially from China, continues to drive up prices for New Zealand wood," Mr Downes said.

Transportation prices lift

Services import prices rose 12.0 percent while export prices fell 0.4 percent in the March 2021 quarter, leading to an 11.1 percent fall in the services terms of trade.

The increase in import prices was carried by a 52.2 percent increase for transportation services - setting new records for the largest quarterly increase and highest levels since the series began.

"The dramatic rise in import prices for transportation services reflects increased costs for sea transport," Mr Downes said. "Container shortages, port congestion, and increasing demand for consumer goods has led to increased shipping costs around the world."