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Terms of Trade For June Quarter 2016

Terms of trade (TOT) refers to the relative price of exports in terms of imports and is defined as the ratio of export prices to import prices. It can be
07 Jan 2017 11:00
Terms of Trade For June Quarter 2016
Peter Fuata.

Terms of trade (TOT) refers to the relative price of exports in terms of imports and is defined as the ratio of export prices to import prices.

It can be interpreted as the amount of import goods an economy can purchase per unit of export goods.

An improvement of a nation’s terms of trade benefits that country in the sense that it can buy more imports for any given level of exports.

The terms of trade may be influenced by the exchange rate because a rise in the value of a country’s currency lowers the domestic prices of its imports.

But may not directly affect the prices of the commodities it exports.

The TOT index for June quarter of 2016 stood at 103.0 which is a decrease of 0.1 per cent when compared to the March quarter of 2015.

The export price decreased by 0.2 percent and import price index fell by 0.1 per cent.

In June quarter of 2016, the following was recorded when compared to March quarter of 2016;

  • The international merchandise terms of trade price index rose by 0.5 per cent;
  • Export prices for goods rose by 0.4 per cent and
  • Import prices for goods fell by 0.1 per cent.

There were significant changes in the following export and import items when comparisons were made to the March quarter of 2016 and June quarter of 2015 periods.

 

Changes over the March quarter of 2016

The overall Export Price Index (XPI) for the June quarter of 2016 stands at 104.3 which is an increase of 0.4 per cent when compared to the previous quarter [103.9].

 

Increases were recorded for:

  • Prepared foodstuffs; beverages, spirits and vinegar; tobacco and manufactured tobacco substitutes increased by 2.3 per cent due to high export prices of sugar and sugar confectionery.
  • Pulp of wood or of other fibrous cellulosic material; waste and scrap of paper or paperboard; paper and paperboard and articles thereof increased by 1.3 percent due to high export prices of cartons and
  • Vegetable products increased by 1.0 percent due to high export prices of cassava, dalo and kava.

 

Changes over the June quarter of 2015

The XPI for the June quarter of 2016 decreased by 0.2 per cent when compared to the same period last year.

Decreases were recorded for:

  • Prepared foodstuffs; beverages, spirits and vinegar; tobacco and manufactured tobacco substitutes decreased by 1.1 per cent due to low export prices of sugar and sugar confectionery and beverages
  • Products of the chemical or allied industries decreased by 1.1 percent due to low export prices of pharmaceutical products, paints, essential oils and soap
  • Natural or cultured pearls, precious or semi-precious stones, precious metals, metals clad with precious metal and articles thereof; imitation jewellery decreased by 1.1 per cent due to low export prices of gold and
  • Mineral products decreased by 1.8 per cent due to low export prices of aviation fuel, kerosene, unleaded petrol, automotive diesel oil and industrial diesel oil.

 

Changes over the March quarter of 2016

The overall Import Price Index (MPI) for the June quarter of 2016 stands at 101.3 per cent which is a decrease of 0.1 per cent when compared to the previous quarter.

 

Decreases were recorded for the following;

  • Live animals; animal products decreased 1.8 percent due to low import prices of lamb, fish baits;
  • Prepared foodstuffs; beverages, spirits and vinegar; tobacco and manufactured tobacco substitutes decreased by 1.1 percent due to low import prices of tin fish, cereals, peanut butter, orange juice, tomato sauce and
  • Textiles and textiles articles decrease by 1.0 percent due to low import prices of man-made staple fibres and articles of apparel and clothing accessories.

 

Changes over the June of 2015

The MPI for the March quarter of 2016 decreased by 0.1 per cent when compared to the same period last year.

 

Decreases were recorded for the following;

  • Base metals and articles of base metal decreased by 1.4 percent due to low import prices of iron and steel and articles of iron or steel.
  • Vegetable products decreased 0.6 percent due to low import prices of onions, shallots, garlic, grapes and apples;
  • Pulp of wood or of other fibrous cellulosic material; waste and scrap of paper or paperboard; paper and paperboard and articles thereof deceased by 0.6 per cent due to low import prices of paper and paperboard.
  • Live animals; animal products decreased by 0.6 percent due to low import prices of lamb, fish baits and milk

It is important to monitor our Terms of Trade as a nation because the effects it has on the Fiji economy on a micro and macro level is far reaching from big companies to the individuals within Fiji.

It indicates Fiji’s competitiveness in the international market and affects the purchasing power parity of individuals within Fiji i.e. the value of money in purchasing goods.

If we do not monitor our terms of trade we will not be able to pinpoint improvements domestically.

And will be walking blind into the international market without optimally positioning ourselves to ensure we encourage a healthy economic growth.

nThis is an informative publication, sponsored by The Fiji Sun, Fiji Bureau of Statistics and HFC Bank. All views expressed or implied are purely of the Treasurer at the HFC Bank, Peter Fuata.

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