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Overseas Trade Indexes (Volumes): June 2012 quarter (provisional)
Embargoed until 10:45am  –  03 September 2012
Data quality

Period-specific information
This section contains data information that has changed since the last release.

General information
This section contains information that does not change between releases.

Period-specific information

Time of recording

The import and export merchandise series in this release are calculated from the same data as used in the Overseas Merchandise Trade: July 2012 monthly release, published on 24 August 2012. Updates published after this date will be included in subsequent overseas trade index (volumes) releases.

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.

Imputation for the June 2012 quarter

For the June 2012 quarter, the base annual imputation rates were 18.0 percent for exports and 38.0 percent for imports.

See imputation for further information.

General information

What the volume indexes measure

The volume indexes are numerical series that indicate how a set of volumes has changed between time periods. Each index measures changes in the level of volumes rather than the actual quantities. It is the change between two index numbers that is important. An individual index number has no meaning.

The overseas merchandise trade volume indexes measure changes in the levels of volumes of exports and imports of merchandise trade to and from New Zealand, on both a quarterly and an annual basis.

Price and volume measurement relates to decomposing 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 analyse which changes in aggregates are due to price movements, and which to volume changes. This is also referred to as 'constant price' measurement, implying the analysis of economic transactions valued at certain fixed prices.

Source of information – merchandise trade data

Value and quantity data used for calculating the merchandise price and volume indexes are derived from Statistics New Zealand's overseas merchandise trade statistics, which are processed from export and import entry documents lodged with the New Zealand Customs Services (NZCS) by exporters, importers, and their agents.

Data is classified using the Harmonised System (HS) 2007  classification for processing the NZCS entries and publishing overseas trade statistics. 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 the values are used in trade index calculations.

For basic, homogeneous commodities not subject to ongoing quality change, unit values provide suitable indicators of price change. However, unit values 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

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 value for duty (vfd) values. Before the September 2003 quarter, the merchandise import indexes used cost, insurance, and freight (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. Import vfd values represent the value of goods excluding the cost of freight and insurance. The vfd valuation for imports is recommended in the System of National Accounts 1993 (SNA 93) and is used in New Zealand's national accounts.

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

Index type and calculation

The merchandise index series are of the chain-linked Fisher Ideal type.

The calculation of a Fisher Ideal index involves first calculating two indexes. One, the Laspeyres, is base-weighted and uses expenditures from an earlier period to weight price or volume movements. The other, the Paasche, is current-weighted and uses expenditures from a current period to weight price or volume movements. The Laspeyres and Paasche indexes are then averaged by calculating the geometric mean (ie the square root) of the two indexes to give the Fisher Ideal index.

In the majority of situations covered by index numbers, price and quantity changes are negatively correlated. In such cases, Laspeyres indexes tend systematically to record greater increases than Paasche indexes, with the gap between them tending to widen over time.

The merchandise index series have a June quarter price reference period, 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 price index methodology involves:

  1. calculating Laspeyres and Paasche price indexes for the current quarter on the previous June quarter
  2. calculating Fisher Ideal price indexes for the current quarter on the previous June quarter (as the geometric mean, or square root, of the Laspeyres and Paasche price indexes calculated in step 1)
  3. linking the Fisher Ideal price index for the current 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 (based on the previous June quarter) are calculated by deflating the change in dollar value from the previous June quarter to the current quarter by 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 calculated as volume index-weighted averages of the four component quarter price indexes, and the annual volume indexes as the simple average of the four component quarterly volume indexes.

Expenditure weights are assigned 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 the goods that New Zealand exports and imports change.

Expression base

The merchandise trade index series are expressed on base: quarter ended June 2002 (=1000).

Index coverage

The merchandise trade indexes include all commodities classified as merchandise trade, although the export indexes exclude re-exports, bunkering, ships' stores, and passengers' effects.

Imputation

Explicitly priced items are those displaying reliable unit-value behaviour, those for which prices are collected directly from importers or exporters, and those for which international price indexes are used as price indicators. Price movements of items that are more reliable indicators of similar type are imputed to the remaining items. 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 following table.

Imputation procedures
Type of index  First level Second level Third level Fourth level
HS10 country grouping (EU, ZZ) Remainder of index
     
HS10 item HS10 country grouping (EU, ZZ)

Remainder of index

 

   
HS2 chapter HS10 country grouping (EU, ZZ) HS10 item Remainder of index  
Standard or broad economic category (BEC) index HS10 country grouping (EU, ZZ) HS10 item HS chapter or part chapter Remainder of index

'Base annual imputation rates' represent the dollar value 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.

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.

Directly surveyed prices are collected from importers and exporters via the existing commodity price survey used for the producers price index.

Directly surveyed prices were first collected in the June 2002 quarter, so they contribute to movements for the September 2002 and subsequent quarters.

The process of adding to the pool of directly surveyed prices is ongoing and is part of the ongoing overseas merchandise trade index quality assurance programme.

International price indexes

International price indexes are used selectively as a proxy to measure price change faced by importers for goods that are irregularly imported (eg public transport equipment) or imported to one-off specifications (eg telephonic and telegraphic apparatus), and for technically complex goods subject to rapid quality change (eg computer equipment).

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 change in prices faced by New Zealand importers. Most use is made of the US producer price index (PPI), with some use of 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 table lists the main goods for which international price indexes are currently used in the import indexes.

International price index
HS chapter Goods International price index
84 Mechanical machinery
Printing machinery US producer price index
Computer equipment US producer price index
Computer and office equipment parts and accessories US producer price index
85 Non-electrical machinery
Telephonic and telegraphic apparatus US HS export price index
Cellular phones US producer price index
Radio-telephonic parts US HS export price index
86 Railway equipment US producer price index
87 Vehicles other than railway equipment Minor use of US HS export price 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 to 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 index for computers is 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 quarterly constant price imports in gross domestic product (GDP).

Adjustment to unit values for imported cars

The calculation of price movements for the main HS 10-digit item codes for cars differs from the unit-value calculation used for other items in the merchandise trade indexes. The used car codes have previous June quarter and current quarter unit values calculated for each year of manufacture and the new car codes have unit values calculated for each of the main makes of car recorded under the codes. Movements in these unit values are weighted by the value of cars imported for each year of manufacture and make of car, respectively, to give Paasche, Laspeyres, and Fisher indexes at the HS 10-digit item-by-country level.

The method was introduced in the June 2002 quarter to reduce the effect of new frontal impact standards on the age distribution of used car imports, which reduced the number of pre-1996 used cars being imported.

The dollar value of the car items treated in this way accounted for 8.9 percent of the total dollar value of imports in the year to June 2003.

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.

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 quicker to identify turning points.

Trend estimates are recalculated each quarter. The use of new quarterly data means that previously published trend estimates are revised. 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 are likely to be substantially revised.

Seasonally adjusted estimates – merchandise trade

The X-12-ARIMA package is used to produce the seasonally adjusted estimates referred to in the media release, key facts, commentary, and tables. Seasonal adjustment aims to eliminate the impact of regular seasonal events (such as lambing or harvesting) on time series. This makes the data for adjacent quarters more comparable.

The most recent seasonally adjusted figures are revised each quarter. This enables the seasonal component to be better estimated and removed from the series. The largest revisions occur in the quarter before the current quarter.

Consistency of broad economic categories with national accounts’ classes

Broad economic categories (BECs) are arranged, as far as practicable, to align with the System of National Accounts’ three basic classes: capital goods, intermediate goods, and consumption goods. Commodities in BECs are categorised by their main end use (eg all video recorders are treated as consumption goods even though some are used in business).

Release of latest results

Merchandise trade provisional indexes are available within nine weeks of the end of the reference period. Final indexes are released within 22 weeks of the end of the reference period.

More information

See also information about the Overseas Trade Indexes (Volumes).

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. 

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