Overseas Trade Indexes (Prices): December 2014
quarter (provisional)
Embargoed until 10:45am – 02 March 2015

Key facts
The following movements occurred in the December 2014 quarter, compared with the September 2014
quarter.
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The merchandise terms of trade fell 1.9 percent.
Export prices for goods fell 1.8 percent.
Import prices for goods rose 0.2 percent.
The services terms of trade fell 3.2 percent.
Services export prices rose 1.4 percent.
Services import prices rose 4.7 percent.

Teresa Dickinson, Acting Government Statistician
ISSN 1178-0339
2 March 2015

 Commentary
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Overview for the December 2014 quarter
Export goods prices fall
Dairy prices fall 15 percent
Meat prices rise 12 percent
Forestry product prices rise 8.4 percent
Import goods prices rise
Petroleum and petroleum product import prices fall 10 percent
Import prices rise for capital and consumption goods, fall for intermediate goods
Prices rise for services exports and imports
Exchange rate information

Overview for the December 2014 quarter
The merchandise terms of trade fell 1.9 percent in the December 2014 quarter, due to export
prices falling and import prices rising. This is the second consecutive fall in the terms of trade,
following six increases in a row.
In the December 2014 quarter:
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export prices for goods fell 1.8 percent
import prices for goods rose 0.2 percent.

Terms of trade is a measure of the purchasing power of New Zealand's exports abroad. The
latest fall means 1.9 percent less merchandise imports could be funded by a fixed quantity of
merchandise exports than in the September 2014 quarter.
The services terms of trade fell 3.2 percent in the December 2014 quarter, due to import prices
rising more than export prices.
See definitions for more information on services.

Export goods prices fall
Export goods prices fell 1.8 percent in the December 2014 quarter, following a 4.6 percent fall in
the September 2014 quarter.
The Reserve Bank trade weighted index (TWI) fell 2.5 percent in the December 2014 quarter. A
falling New Zealand dollar has an upward impact on export prices.
Excluding dairy prices (down 15 percent), export prices rose about 4.9 percent this quarter.
From the December 2013 quarter to the December 2014 quarter (ie in the year to the December
2014 quarter), export prices fell 7.6 percent.

2

 Dairy prices fall 15 percent
Dairy prices fell 15 percent in the December 2014 quarter, their second consecutive double-digit
fall. They are now down 28 percent from a recent peak in the March 2014 quarter, and are at
their lowest level since early 2013.
The fall in dairy prices was widespread, with milk powder prices falling 20 percent. Milk powder
prices fell in all three months of the December 2014 quarter.
In the year to the December 2014 quarter, dairy prices fell 26 percent, compared with a 49
percent increase in the year to the December 2013 quarter. Dairy prices are now 31 percent
below their all-time peak in the December 2008 quarter.

Meat prices rise 12 percent
Meat prices rose 12 percent in the December 2014 quarter, influenced by higher prices for beef.
Beef prices rose 23 percent. This is the highest level for beef prices since the series began in the
December 1971 quarter, and is 21 percent higher than the previous high in the December 2001
quarter.
Lamb prices rose 5.7 percent, and are now 9.8 percent below their December 2011 quarter high.
The 23 percent quarterly increase for beef prices is the largest since the series began. The
previous high of 23 percent was for the June 1978 quarter. Beef prices increased 40 percent in

3

 the year to the December 2014 quarter – the highest annual increase since a 43 percent
increase for the year to the September 1979 quarter. However, the annual increase is still well
below the all-time high of 76 percent for the year to the June 1976 quarter.
In the year to the December 2014 quarter, meat prices increased 19 percent.

Forestry product prices rise 8.4 percent
Forestry product prices rose 8.4 percent in the December 2014 quarter, due to higher prices for
wood (up 9.9 percent), wood pulp (up 7.1 percent), and paper and paper products (up 5.4
percent).
In the year to the December 2014 quarter, forestry product prices decreased 2.9 percent.

4

 Import goods prices rise
Import goods prices rose 0.2 percent in the December 2014 quarter, following no overall
movement in the September 2014 quarter and a 2.3 percent fall in the June 2014 quarter.
Several groups contributed to the rise, including mechanical machinery (up 5.1 percent) and
transport equipment (up 2.2 percent).
The main offsetting influence came from petroleum and petroleum products (down 10 percent).
Excluding petroleum and petroleum products, import prices rose 2.3 percent this quarter.
In the year to the December 2014 quarter, import prices decreased 3.1 percent.

Petroleum and petroleum product import prices fall 10 percent
Petroleum and petroleum product prices fell 10 percent in the December 2014 quarter, due to
lower crude oil prices. Crude oil is at its lowest level since the March 2011 quarter. Prices for
imports and exports can be set by contracts formed before the goods enter or leave the country,
so Overseas Trade Index price movements may lag behind those for international prices.
In the year to the December 2014 quarter, petroleum and petroleum product prices decreased 14
percent, with crude oil prices down 19 percent.

5

 Import prices rise for capital and consumption goods, fall for
intermediate goods
In the December 2014 quarter:
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capital goods prices rose 1.2 percent, influenced by higher prices for non-transport
equipment capital goods (such as computer equipment, influenced by the lower New
Zealand dollar)
consumption goods prices rose 2.3 percent, influenced by higher prices for primary food
and beverages mainly for household consumption (such as bananas)
intermediate goods prices fell 1.4 percent, influenced by lower prices for primary fuels
and lubricant (such as crude oil).

6

 Prices rise for services exports and imports
The services terms of trade fell 3.2 percent in the December 2014 quarter, due to import prices
rising more than export prices.
Prices for services exports (ie services to non-residents) rose 1.4 percent in the December
2014 quarter.
The rise in services export prices was mainly influenced by:
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transportation services (up 4.8 percent, reflecting higher prices for air
passenger services)
travel services (up 0.9 percent, due to higher prices for personal travel services).

Travel exports measures changes in the prices paid by overseas consumers and businesses
travelling in New Zealand.
Prices for services imports (ie services provided by non-residents) rose 4.7 percent in the
December 2014 quarter.
The rise in services import prices was influenced by transportation services – up 13 percent,
reflecting higher prices for:
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sea freight (particularly for routes to Asia)
air passenger services (influenced by seasonally higher fares to Asia, Europe, and North
America).

7

 Transportation imports measures changes in the prices paid by New Zealand consumers and
businesses using foreign air and sea services.

Exchange rate information
The Reserve Bank of New Zealand's trade weighted index (TWI) fell 2.5 percent in the
December 2014 quarter. A falling New Zealand dollar has an upward influence on both export
and import prices.
Import values are converted to New Zealand dollars by the New Zealand Customs Service
(NZCS) using their exchange rates. These exchange rates can lag by 11 to 25 days compared
with the Reserve Bank rates. The trade weighted index calculated using NZCS rates fell 4.3
percent in the December 2014 quarter.
See Basis of valuation – merchandise trade in the data quality section for more information on
exchange rates.
The following graphs and tables give more information about exchange rate movements over
the December 2014 quarter.

8

 Exchange rates for December 2014 quarter
Reserve Bank of New Zealand
Trade
USA
UK
Australia
Japan
Euro
weighted
(NZ$:US$) (NZ$:pound) (NZ$:A$) (NZ$:yen) (NZ$:euro)
index
Change from September
2014 quarter (%)

-7.2

-2.1

0.4

2.2

-1.5

-2.5

Exchange rates for December 2014 quarter
New Zealand Customs Service
Trade
USA
UK
Australia
Japan
Euro
weighted
(NZ$:US$) (NZ$:pound) (NZ$:A$) (NZ$:yen) (NZ$:euro)
index
Change from September
-7.7
-3.4
-0.7
0.3
2014 quarter (%)
For more detailed data see the Excel tables in the 'Downloads' box.

9

-1.6

-4.3

 Definitions
About the overseas trade indexes (prices) release
The overseas trade indexes (prices) measure changes in the prices of imports and exports of
goods and services. This release provides information about price movements in five indexes.
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The overseas merchandise trade price indexes measure changes in the price levels of
imports and exports of merchandise trade to and from New Zealand.
The overseas services trade indexes measure changes in price levels of imports and
exports of services to and from New Zealand on a quarterly basis.
The overseas terms of trade index measures the changing volume of merchandise
imports that can be funded by a fixed volume of New Zealand's merchandise exports.

Each index shows how a set of prices has changed over time. It is the change between two
index numbers that is important. An individual index number has no meaning.

About the terms of trade index
The terms of trade index measures the changing volume of merchandise imports that can be
funded by a fixed volume of New Zealand's merchandise exports. The merchandise terms of
trade index is calculated as the ratio of the total export price index to the total import price index.
This is then presented on an index reference period of the quarter ended June 2002 (=1000).

More definitions
Broad economic categories (BEC): are arranged, as far as practical, to align with the System
of National Accounts’ three basic classes – capital goods, intermediate goods, and consumption
goods. Commodities in the BEC are categorised based on their main end use. This means, for
example, that all digital cameras are treated as consumption goods even though some are used
in business.
Capital goods: produced assets used repeatedly or continuously for longer than one year in
industrial production processes. Examples are machinery, trucks, and aircraft.
Consumption goods: goods used (without further transformation in industrial production
processes) by households, government, or non-profit institutions serving households.
There are three types of consumption goods:
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durables have an expected usage of three years or more, eg appliances, furniture
semi-durables have an expected usage of one or two years, eg footwear, clothing,
games, toys
non-durables have an expected usage of less than a year, eg medicines, cosmetics,
yarns, books.

fob: free on board (the value of goods at New Zealand ports before export), which includes the
cost of the goods plus the cost (including loading charges) of putting them on a vessel or aircraft.

10

 Government services (exports): includes sales of capital assets (excluding land), estimated
expenditure of foreign embassies in New Zealand, the portion of the government's international
aid spent in New Zealand, and the government's receipts from immigration fees.
Government services (imports): operational expenses of New Zealand's embassies overseas
and the costs of the New Zealand defence forces stationed overseas.
Index reference period: the benchmark with which prices in other periods are compared (eg if
the index number in a later period is 1150, prices have increased by 15 percent since the index
reference period). Prices for later periods can also be compared in a similar fashion. The
overseas merchandise trade indexes have an index reference period of the June 2002 quarter
(=1000). The overseas services trade indexes have an index reference period of the June 2014
quarter (=1000).
Intermediate goods: goods used up or transformed in industrial production processes.
Merchandise trade: exports or imports of goods that increase or decrease the stock of material
resources in New Zealand. Includes goods leased for a year or more.
Services: products other than tangible goods. Services result from production activity that
changes the conditions of the consuming units, or makes the exchange of products or financial
assets possible.
Other services: services other than transportation, travel, and government services. Examples
are insurance, royalties and licence fees, banking and financial services, computer and
information services, telecommunications, and personal, cultural, and recreational services.
Price index: measures the change in price between time periods for a given set of goods or
services. It summarises a set of prices for a variety of goods or services.
Re-exports: exported goods that were previously imported into New Zealand and that include
less than 50 percent New Zealand content by value.
Transportation: the international carriage of goods and passengers. Includes freight, airfares,
port services, and stevedoring.
Travel (exports): what overseas visitors spend while travelling in New Zealand, and the
expenditure by international students in New Zealand.
Travel (imports): what New Zealanders spend while travelling overseas.
vfd: value for duty (the value of imports before insurance and freight costs are added).

11

 Related links
Next releases
Overseas Trade Indexes (Prices): March 2015 quarter (provisional) and Overseas Trade Indexes
(Volumes): March 2015 quarter (provisional) will both be released on 2 June 2015.
Subscribe to information releases, including this one, by completing the online subscription form.
The Release calendar lists all information releases by date of release.

Past releases
Overseas Trade Indexes – information releases has links to past releases.

Related information
Overseas Trade Indexes – information releases
Overseas Trade Indexes (Volumes) measure changes in the volumes of imports and exports of
goods and services. These indexes are published quarterly on the same day as Overseas Trade
Indexes (Prices) releases.
Overseas merchandise trade
Information on the importing and exporting of merchandise goods between New Zealand and
other countries. These statistics are published monthly.
Balance of Payments and International Investment Position – information releases
The statements in these information releases are records of the value of New Zealand's
transactions with the rest of the world in goods, services, income, and transfers. They also
record changes in New Zealand's financial claims on (assets) and liabilities to the rest of the
world. New Zealand's international investment position statements provide a snapshot of the
country's international financial assets and liabilities. Balance of payments statistics are released
quarterly and annually.
National Accounts – information releases
Measure values of a range of economic aggregates such as gross domestic product, capital
formation, and government and private consumption.
Economic Survey of Manufacturing – information releases
Provide an economic indicator of how the manufacturing sector is performing.
New Zealand Customs Service
More information on the government agency with the job of ensuring the security of our borders.
Ministry of Foreign Affairs and Trade
More information on the Government’s principal adviser and negotiator on foreign and trade
policy issues.

12

 Data quality
Period-specific information
This section contains information that has changed since the last release.
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Data influencers
Timing of published data
Imputation for the December 2014 quarter
Exchange rates

General information
This section contains information that does not change between releases.
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What the price indexes measure
Source of information – merchandise trade
Basis of valuation – merchandise trade
Index type and calculation – merchandise trade
Source of information – services
Basis of valuation – services
How services trade indexes are calculated
How the terms of trade are calculated
Index coverage
Updating the overseas services trade price index classification
Imputation
Trend estimates – merchandise trade
How the unit values of imported cars are calculated
Directly surveyed prices
International price indexes
Effect of exchange-rate movements on terms of trade
Contract indexation
Release of latest results
More information

Period-specific information
Data influencers
In the September 2014 overseas merchandise trade release, we imputed the value for some
commercially sensitive aircraft imports. The treatment of these aircraft also applies to this
overseas trade indexes release.
See the data quality section of Overseas Merchandise Trade: September 2014 for more details.

Timing of published data
The merchandise price indexes in this release are calculated from the same data used
in Overseas Merchandise Trade: January 2015 published on 26 February 2015. Updates
published after this date are not included.

13

 Overseas merchandise trade statistics are provisional for the three most-recent months, which
means the statistics may be amended in the three months after initial publication.
Merchandise price indexes are provisional for one quarter, to allow for the inclusion of late data
and amendments to the merchandise trade source data. Merchandise values in this release that
relate to the September 2014 quarter are based on later data than that used for the previous
overseas trade indexes release (for the September 2014 quarter), published on 1 December
2014.
The price indexes for services are final figures (unlike the merchandise series, which are first
published as provisional figures). The services index may be revised when lagged prices are
used in new indexes and are later replaced by current prices. However, the services indexes are
usually revised only for significant errors.
Numbers that have been revised are identified by an R beside the revised number in the tables
that accompany this release.

Imputation for the December 2014 quarter
For the December 2014 quarter, the base annual imputation rates were 18.3 percent for exports
and 39.0 percent for imports.

Exchange rates
A depreciating New Zealand dollar has an upward influence on both import and export prices in
New Zealand dollars. The impact on the terms of trade depends on the relative mix of exports
and imports for each currency.
The Reserve Bank's trade weighted index (TWI) fell 2.5 percent in the December 2014 quarter.
The trade weighted index that Statistics NZ calculates using New Zealand Customs Service
(NZCS) exchange rates, which are used to value imports, fell 4.3 percent in the December 2014
quarter.
Exchange rates used to calculate merchandise import values differ from the weekly exchange
rates used to calculate merchandise export values. Import values are converted from foreign
currencies, using exchange rates set by the NZCS every two weeks. These exchange rates are
prepared 11 days before the effective date (when the item was imported) and are then applied
for two weeks. Therefore, there is a lag of 11 to 25 days between the exchange rates used by
the NZCS compared with the exchange rates the Reserve Bank publishes.

General information
What the price indexes measure
These indexes are numerical series that indicate how a set of prices has changed between time
periods. Each index measures changes in the level of prices rather than the actual prices. It is
the change between two index numbers that is important. An individual index number has no
meaning.

14

 The overseas merchandise trade price indexes measure changes in the price levels of
imports and exports of merchandise trade to and from New Zealand, on both a quarterly and an
annual basis.
The overseas services trade indexes measure changes in price levels of services to and from
New Zealand on a quarterly basis.
Price and volume measurement relates to the decomposition of transaction values in current
prices into their price and volume components. In principle, the price components should include
changes arising solely from price changes, while all other changes (relating to quantity, quality,
and compositional changes) should be included in the volume components. The aim is to
estimate which changes in aggregates are due to price movements, and which to volume
changes.

Source of information – merchandise trade
Value and quantity data used for calculating the merchandise price indexes are derived from
Statistics NZ's overseas merchandise trade statistics, which are based on export and import
entry documents lodged with NZCS by exporters, importers, and their agents. The value and
quantity data are published in the monthly overseas merchandise trade releases.
Data is classified using the Harmonised System (HS) 2012 classification. New Zealand and more
than 190 other countries base their customs tariffs and the collection of international trade
statistics on the HS classification. There are over 18,600 10-digit items in the HS classification.
HS 10-digit item-by-country unit values are derived from Statistics NZ's overseas trade statistics.
Quarterly item-by-country unit values are calculated by dividing the total value of an HS item
exported or imported during the quarter by the total quantity of the item exported or imported
during the quarter. These unit values are then extensively edited, with outliers removed before
being used in trade index calculations.
For basic, homogeneous commodities not subject to ongoing quality change, individual prices
provide suitable indicators of price change. However, individual prices do not provide good
indicators of price change for heterogeneous goods such as elaborately transformed goods,
technically complex goods, or goods subject to rapid quality change. Unit values are selectively
supplemented with prices collected directly from importers and exporters, and by international
price indexes.

Basis of valuation – merchandise trade
The merchandise export indexes are calculated using New Zealand-dollar free on board (fob)
values. Export fob values represent actual or estimated transaction prices of goods, including
costs incurred in delivering goods on board ships and aircraft at New Zealand ports of export.
Values given in foreign currencies are converted by Statistics NZ into New Zealand dollars using
weekly exchange rates when the statistics are compiled. This means that any hedging will
generally not be reflected in the merchandise import and export price indexes.
The merchandise import indexes use New Zealand-dollar vfd values (the value of imports
before insurance and freight costs are added). Before the September 2003 quarter, the
merchandise import indexes used cif values, which represented the value of goods plus the
insurance and freight costs associated with bringing the goods to New Zealand ports of entry.
The vfd valuation for imports is recommended in the System of National Accounts 1993 and is
used in the New Zealand national accounts.

15

 Vfd values are converted from foreign currencies when import documents are processed by
NZCS. The NZCS exchange rates are prepared 11 days before the effective date and are then
applied for two weeks. Therefore, the exchange rate used in the imports prices will be 11 to 25
days old when it is used in imports documentation. This means that the NZCS exchange rate,
and therefore the imports prices, will be slower to show the impact of changes in the exchange
rate than the Reserve Bank rates and the export prices.
Merchandise import price indexes are not directly affected by changes in the rates of duty
payable on imported goods, as vfd values do not include duty. Therefore, the phased reduction
in tariffs that has occurred at times has not had a direct downward influence on the import price
indexes.

Index type and calculation – merchandise trade
The merchandise index series are chain-linked Fisher Ideal indexes. The calculation of a Fisher
Ideal index involves first calculating two other indexes. One, the Laspeyres, is base-weighted
and uses data about past spending to weight price or volume movements. The other, the
Paasche, is current-weighted and uses data about current spending to weight price or volume
movements. The Laspeyres and Paasche indexes are then averaged by calculating the
geometric mean (that is, the square root) of the two indexes to give the Fisher Ideal index. Most
of the time, price and quantity changes are negatively correlated. In such cases, Laspeyres
indexes tend to systematically record greater increases than Paasche indexes, with the gap
between the indexes tending to widen over time.
The merchandise index series use June quarter prices as a reference, and are linked to the
index for the June quarter of each year. There are annual expenditure weight reference periods
for both the Laspeyres (previous June year) and Paasche (year to each quarter) components of
the index.
The overseas trade price indexes are calculated by:
1. calculating Laspeyres and Paasche price indexes for the current quarter compared
with the previous June quarter
2. calculating Fisher Ideal price indexes for the current quarter, compared with the previous
June quarter, which is the geometric mean (or square root) of the Laspeyres and
Paasche price indexes as calculated in step 1
3. linking the Fisher Ideal price index for the current quarter compared with the previous
June quarter (calculated in step 2) to the index for the previous June quarter, to provide a
continuous quarterly time series.
The Laspeyres and Paasche volume indexes for the current quarter compared with the previous
June quarter are calculated by deflating the change in dollar value from the previous June
quarter to the current quarter using the Paasche and Laspeyres price indexes, respectively
(calculated in step 1 above). Steps 2 and 3 are repeated as above, using volume (rather than
price) indexes.
The annual price indexes are volume index-weighted averages of the four component quarter
price indexes, and the annual volume indexes are the simple average of the four component
quarterly volume indexes.
Items are assigned expenditure weights at the HS 10-digit item-by-country level. Item and index
weights are not fixed. They vary from quarter to quarter and from year to year as the relative
values of goods New Zealand exports and imports change.

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 Source of information – services
Value data used to calculate the weights used in the service indexes is derived from Statistics
NZ's balance of payments data, which comes from various surveys operated by the Balance of
Payments business unit. Every year, new weights are used to calculate the services indexes
from the September quarter onwards. These weights use balance of payments data for the year
ended June.
Pricing information used to calculate the indexes is collected in Statistics NZ's Commodity Price
Survey. The Commodity Price Survey collects prices for approximately 10,000 individual items.
The prices are collected by postal survey from about 2,200 respondents and supplemented by
prices gathered from international price indexes. Prices are generally collected each quarter. The
price on the 15th day of the middle month of the quarter is used to measure domestic prices.
Prices may be collected quarterly or annually depending on the nature of the item. For the import
services indexes, many of the prices come from international price indexes. The collection of
these prices depends on the frequency and timeliness of their publication. If they are published
monthly, the middle month of the quarter is used; however, in some cases the prices are lagged
a month or a quarter if the value for the relevant period is not available in time.

Basis of valuation – services
The services price indexes use New Zealand-dollar values for both exports and imports.
Exchange rates used to calculate the services indexes differ from those used for the
merchandise indexes. Prices collected in foreign currencies are converted using the exchange
rate supplied by Westpac Bank for the 15th day of the middle month of the quarter. The foreign
currencies used in the services indexes include the US dollar, Australian dollar, Fijian dollar,
Japanese yen, and the United Kingdom pound.

How services trade indexes are calculated
The services indexes are an annually chain-linked Laspeyres price index series. The weights are
determined by the relative importance of services and businesses within the service industry.
Information from various surveys, censuses, and other sources is used to determine the weights.

How the terms of trade are calculated
The merchandise terms of trade index is calculated as the ratio of the total export price index
to the total import price index. This is then presented on an index reference period of the quarter
ended June 2002 (=1000).
The services terms of trade index is calculated as the ratio of the total services export price
index to the total services import price index, with the June 1997 quarter used as the index
reference period.
An index value above (or below) 1000 indicates that the terms of trade are more (or less)
favourable than in the index reference period.
An increase in the terms of trade index indicates that the real purchasing power of exports has
increased, while a decrease indicates a drop in the purchasing power of exports.

17

 Index coverage
The merchandise trade indexes include all commodities classified as merchandise trade,
although the export indexes exclude re-exports, bunkering (re-fuelling the vessels), ships' stores,
and passengers' effects.
The services indexes are based on the System of National Accounts 1993. The system
establishes the range of services that should be included in the indexes, and key practices that
should be used to classify and process services data, for example the treatment of insurance.

Updating the overseas services trade price index classification
From the September 2014 quarter onwards, the overseas trade price indexes will use updated
information from the Balance of Payments Manual, sixth edition (BPM6).
The International Monetary Fund's Balance of Payment Manual guides and determines the
scope and structure of the overseas services trade price indexes. Each year, the required
weights to calculate the overseas services trade price indexes are sourced from Statistics NZ’s
balance of payments data, which were recently improved according to the BPM6.
The impact of the BPM6 changes on the overseas services trade price indexes is not large.
The two main changes that impact on the overseas services trade price indexes are:
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‘merchanting’ changed from being classified as services to goods
‘repairs on goods’ changed from being classified as goods to services.

We recalculated the overseas services trade price indexes from the December 2009 quarter to
the June 2014 quarter using new weights and the BPM6 changes.
The new index reference period of the overseas services trade price indexes is the June 2014
quarter (=1000). The previous index reference period was the June 1997 quarter.
For index series with coverage changes (ie other services and transportation services), the new
index time series starts from the December 2009 quarter. The index time series with no coverage
changes (ie travel services and government services) have been linked to the old series at the
December 2009 quarter.
The BPM6-based overseas services trade price indexes are, from the September 2014 quarter
onwards, the official set of indexes maintained by Statistics NZ. As such, we have discontinued
the existing overseas services trade price index series on Infoshare, ending in the June 2014
quarter.
Index reference period
The index reference period for the BPM6-based overseas services trade price indexes is the
June 2014 quarter (=1000). The choice of an index reference period is arbitrary and the
percentage movement in the indexes are unaffected by the choice of the index reference period.

18

 Series references
The BPM6-based overseas services trade price indexes series have new series references as
follows:
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Services import (OTPQ.SSIP---) e.g. OTPQ.SSIP999
Services export (OTPQ.SSEP---) e.g. OTPQ.SSEP999
Services terms of trade (OTPQ.STTS---) e.g. OTPQ.STTS999

See Preview of 2014 balance of payments improvements for more information.

Imputation
There are three types of explicitly priced items:
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reliable unit values based on merchandise trade data
prices collected directly from importers or exporters
international price indexes used as price indicators.

Prices for remaining items are imputed using price movements of items of a similar type that are
more reliable indicators.
The overseas trade indexes are Fisher Ideal indexes. As Fisher Ideal indexes are calculated at
the country grouping level (for the European Union (EU) and the 'Rest of World' (ZZ)), and the
HS 10-digit item level for all countries, imputation occurs at up to four levels, as shown in the
table below.
Imputation procedures
Type of index
First level
Second level
Third level
Fourth level
HS10 country
Remainder of
grouping
index
(EU, ZZ)
HS10 country
Remainder of
HS10 item
grouping
index
(EU, ZZ)
HS10 country
Remainder of
HS2 chapter
grouping
HS10 item
index
(EU, ZZ)
Standard or broad HS10 country
HS chapter or part Remainder of
economic category grouping
HS10 item
chapter
index
(BEC) index
(EU, ZZ)
Base annual imputation rates are the dollar values of goods in the previous June year of the
index's imputed items, as a percentage of the index's total dollar value for the previous June
year.

Trend estimates – merchandise trade
Time series can be split into trend, seasonal, and irregular components. Seasonal adjustment
removes the seasonal component, while trend estimation removes the seasonal and irregular
components. Trend estimates reveal the underlying direction of movement in a series and are
used to identify turning points.

19

 The merchandise terms of trade trend series is calculated using X-12-ARIMA, which adjusts for
outlying values and uses a centred moving average. The length of the centred moving average is
selected automatically and can be 9, 13, or 23 months, depending on the relative variability of
the irregular component compared with the trend. A long moving average has the effect of
smoothing the trend series but slowing the response to underlying changes in growth rates, while
a short moving average produces a trend series that is less smooth but which can be used to
more quickly identify turning points.
Trend estimates are recalculated each quarter. The use of new quarterly data means that
previously published trend estimates are subject to revision. Revisions can be particularly large if
an observation is treated as an outlier in one quarter, but is found to be part of the underlying
trend as further observations are added to the series. Typically, only the estimates for the most
recent quarters will be subject to substantial revisions.

How the unit values of imported cars are calculated
The calculation of price movements for the main HS 10-digit item codes for cars differs from the
price calculation used for other items in the overseas trade indexes. The used-car codes have
previous June quarter and current quarter prices calculated for each year of manufacture, and
the new car codes have prices calculated for each of the main makes of car recorded under the
codes. Movements in these prices are weighted by the value of cars imported, for each year of
manufacture (used cars) and make of car (new cars), to give Paasche, Laspeyres, and Fisher
indexes at the HS 10-digit item-by-country level.
The method described above was introduced in the June 2002 quarter, to reduce the effect of
new frontal impact standards on the age distribution of used-car imports. New frontal impact
standards reduced the number of pre-1996 used cars being imported.
The dollar value of the cars treated in this way made up 8.9 percent of the total dollar value of
imports in the year to June 2003.

Directly surveyed prices
Prices are collected directly from importers and exporters for selected goods that are regularly
imported or exported in the same form to the same or similar specification. These items may not
have a specified unit of quantity, or may fall under an HS code with a heterogeneous description.
The Commodity Price Survey is used to collect prices from importers and exporters. Data from
the Commodity Price Survey is also used for the producers price index.
Directly surveyed prices were first collected in the June 2002 quarter and contribute to
movements in overseas trade indexes for the September 2002 and subsequent quarters.
The process of adding to the pool of directly surveyed prices is an ongoing one and is part of the
overseas merchandise trade index quality assurance programme.

International price indexes
International price indexes are used to estimate price changes for some goods. They are used to
measure changes in the prices faced by importers for goods that are irregularly imported (eg
public transport equipment), imported to one-off specifications (eg telephonic and telegraphic
apparatus), and technically complex goods subject to rapid quality change (eg computer
equipment).

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 The following table lists the areas of the HS classification where international price indexes are
used, and the type of index selected as a proxy for changes in prices faced by New Zealand
importers. Most international price indexes are sourced from the US producer price index (PPI);
some have come from the US HS export price index (EPI). In both cases, monthly international
price index numbers are converted to quarterly index numbers and then exchange-rate adjusted
using the NZCS rates of exchange. The following table lists the main goods for which
international price indexes are currently used in the import indexes.
International price index use
HS chapter
Goods
International price index
Mechanical machinery
Printing machinery
US producer price index
84
Computer equipment
US producer price index
Computer and office equipment parts
US producer price index
and accessories
Electrical machinery
85
Telephonic and telegraphic apparatus US HS export price index
Radio-telephonic parts
US HS export price index
86
Railway equipment
US producer price index
Vehicles other than railway
Minor use of US HS export price
87
equipment
index
88
Aircraft
US producer price index
89
Ships
US producer price index
The US PPI indexes used for computer equipment, parts, and accessories are compiled using
hedonic quality adjustment techniques designed to remove the effect of quality improvements
and isolate pure price change. The US PPI indexes for computer equipment, parts, and
accessories used in the imports price index are lagged one quarter, to reflect a potential delay
from the time new technology is available domestically in the US to the time it is imported into
New Zealand. The US computer indexes used in the merchandise imports price index, and the
one-quarter lag, are both broadly in line with the approach that has been used for some time to
calculate values for quarterly constant price imports included in gross domestic product.

Effect of exchange-rate movements on terms of trade
A decline in the value of the New Zealand dollar has an upward influence on both export and
import price levels, and a strengthening of the dollar has a downward impact on prices of both
exports and imports. This means that any effect on the terms of trade in either case is likely to be
minor. The effect is limited to situations where the New Zealand dollar has weakened or
strengthened against a particular currency and there is a significant imbalance in the values of
exports and imports transacted in, or with prices determined by that currency.

Contract indexation
Parties in commercial contracts use a range of price indexes produced by Statistics NZ in their
indexation clauses (also known as contract escalation clauses). An indexation clause provides
an agreed procedure for adjusting an originally contracted price, to reflect changes in costs or
prices during the life of the contract.
Contract Indexation: A Guide for Businesses provides information on the price indexes produced
by Statistics NZ and issues relating to their use in indexation clauses. The guide also outlines
some points to consider when preparing an indexation clause, and includes an example of the
mechanics of a simple indexation formula.

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 Release of latest results
Provisional merchandise trade indexes are available within nine weeks of the end of the
reference quarter. Final indexes are released within 22 weeks of the end of the reference
quarter.
Only final data is released for the services indexes. This data is available at the same time as the
provisional merchandise trade indexes.

More information
See Overseas trade indexes for more information.
Statistics in this release have been produced in accordance with the Official Statistics System
principles and protocols for producers of Tier 1 statistics for quality. They conform to the
Statistics NZ Methodological Standard for Reporting of Data Quality.

Liability
While all care and diligence has been used in processing, analysing, and extracting data and
information in this publication, Statistics NZ gives no warranty it is error-free and will not be liable
for any loss or damage suffered by the use directly, or indirectly, of the information in this
publication.

Timing
Our information releases are delivered electronically by third parties. Delivery may be delayed by
circumstances outside our control. Statistics NZ does not accept responsibility for any such
delay.

Crown copyright©

This work is licensed under the Creative Commons Attribution 3.0 New Zealand licence. You are
free to copy, distribute, and adapt the work, as long as you attribute the work to Statistics NZ and
abide by the other licence terms. Please note you may not use any departmental or
governmental emblem, logo, or coat of arms in any way that infringes any provision of the Flags,
Emblems, and Names Protection Act 1981. Use the wording 'Statistics New Zealand' in your
attribution, not the Statistics NZ logo.

22

 Revisions
Updates to previously published material
The overseas trade indexes are provisional for one quarter to allow for receiving and editing late
and amended trade documentation. The following table shows updates to index numbers.
September 2014 quarter merchandise overseas trade indexes (prices)
Export price
Import price
index
index
Series ref: OTPQ
SEO1E95
SIO1I95
Provisional Sep 2014 qtr
1112
822
Published 1 Dec 2014
Final Sep 2014 qtr
1111
823
Published 2 Mar 2015

23

Terms of trade
index
STTZZ5
1352
1351

 Contacts
For media enquiries contact:
Chris Pike
Wellington 04 931 4600
Email: info@stats.govt.nz
For technical information contact:
Russell Hewitt
Wellington 04 931 4600
Email: info@stats.govt.nz
For general enquiries contact our Information Centre:
Phone: 0508 525 525 (toll free in New Zealand)
+64 4 931 4600 (outside of New Zealand)
Email: info@stats.govt.nz
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 Tables
The following tables are available in Excel format from the ‘Downloads’ box.
If you have problems viewing the files, see opening files and PDFs.
1.01 Overseas trade price and terms of trade indexes
1.02 Overseas merchandise trade price and terms of trade indexes
2 Merchandise export price indexes
3 Merchandise import price indexes
4.01 Merchandise imports by broad economic category, price indexes
4.02 Merchandise imports by broad economic category, price index percentage change from
previous period
5 Overseas trade in services price indexes
6 Exchange rates, Reserve Bank of New Zealand

Access more data on Infoshare
Infoshare
Select the following categories from the Infoshare homepage for time series data for this release:
Subject category: Imports and exports
Group: Overseas Trade Indexes – Prices

Next releases
Overseas Trade Indexes (Prices): March 2015 quarter (provisional) and Overseas Trade Indexes
(Volumes): March 2015 quarter (provisional) will both be released on 2 June 2015.

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