New Zealand: Oil and logs defy falling trade prices

Photo: Maksym Diachenko / Unsplash

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

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

Terms of trade rose 0.1% in the March 2021 quarter but remained down 0.9% 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% on the quarter, while falling export prices reflected price decreases for dairy products (down 2.4%) and meat (down 1.5%).

“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,” said business prices delivery manager Bryan Downes. “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% 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% 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,” said Downes said.

Export prices for forestry products rose 7.0% in the March 2021 quarter. Within that category, prices for wood exports rose 9.1% 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,” said Downes.

Transportation prices lift

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

The increase in import prices was carried by a 52.2% 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,” shared Downes. “Container shortages, port congestion, and increasing demand for consumer goods have led to increased shipping costs around the world.”