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Strong dairy exports narrow Sept trade deficit

Wednesday 23rd October 2019

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The September trade deficit was narrower than expected as a surge in butter, milk and cheese exports offset a slide in logs and fruit.

The September trade deficit was $1.2 billion while the annual deficit was $5.21 billion, Stats NZ said. Economists polled by Bloomberg had expected a monthly deficit of $1.4 billion and an annual deficit of $5.25 billion.

The “major area of surprise” was the stronger than expected exports, said ASB Bank senior economist Mark Smith.

Exports rose 5.1 percent to $4.5 billion, boosted by a 28 percent or $199 million jump in dairy products to $920 million in September.

The rise was led by milk powder, which lifted $160 million from a year ago, up 51 percent in value and 39 percent in quantity.

“New Zealand is exporting more milk powder than this time last year and getting better prices too,” international statistics manager Darren Allan said.

Meat and edible offal exports rose 27 percent, or $98 million, to $458 million.

Beef alone jumped 29 percent in value to $209 million and was up 21 percent in quantity. Lamb lifted 31 percent in value to $196 million and also up 21 percent in quantity.

Of New Zealand’s main export markets, China had the largest increase in exports, up $227 million or 23 percent to $1.2 billion.

“Exports to China were the leading contributor to increases in several commodities including milk powder, beef, and lamb,” Allan said.

“We anticipate exports of meat and dairy to remain strong over the coming year underpinned by buoyant prices as the supply side, both locally and globally, looks set to remain tight,” said Bank of New Zealand senior economist Doug Steel.

“Meanwhile, African swine fever in China and wider Asia is likely to add to already strong underlying import demand for meat,” he added.

Exports of logs, wood and wood articles, meanwhile, fell $63 million or 14 percent to $395 million while their quantity dipped 3.8 percent.

Kiwifruit exports were down $77 million compared to the prior year at $230 million.

Imports slid 2.1 percent or $122 million to $5.7 billion as petroleum and product imports fell $252 million or 34 percent to $492 million.

Imports of aircraft and parts were down 48 percent or $155 million to $170 million while fertiliser imports fell 54 percent to $62 million.

Smith, however, noted some positive signs of life on the capital goods side of the ledger, with capital imports up 8.1 percent on the year.

“We will continue to monitor these data closely over coming months for further evidence that investment activity is starting to respond to record low interest rates and widespread capacity constraints,” he said.


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