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Annual trade deficit shrinks to lowest level in 7 years as imports fall

Friday 29th January 2010

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New Zealand’s annual trade deficit shrank to the lowest level in seven years last month in the wake of recession that curbed demand for imported goods.

The deficit was $517 million in the year ended December 31, from a revised gap of $860 million in the 12 months through November, according to Statistics New Zealand. Imports in 2009 declined 17% to $40.2 billion, outpacing a 7.5% decline in exports to $39.67 billion.The decline in imports last year was the biggest in at least a decade as the economy’s five-quarter contraction sapped demand.

That’s helped narrow the current account deficit, which measures what the country earns against what it spends, with the gap narrowing to the smallest in six years in the 12 months through September.

“The smaller trade deficit over the December quarter points to some continued narrowing of the current account deficit in the short term,” said Jane Turner, economist at ASB. “We expect these trends to turn over 2010 as the economic recovery takes hold. Import demand is likely to improve, particularly once investment appetites return.”

For the month of December, the trade balance recorded a small surplus of $2 million as exports climbed more than expected to $3.41 billion, about matching imports for the month.

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