Milk powder exports surge 38%, helping shrink trade deficit

Wednesday 29th September 2010

New Zealand's trade deficit shrank last month as a 38% surge in offshore dairy sales led gains in the nation's exports.

The trade deficit was $437 million in August, smaller than the $500 million forecast and down from $717 million in the same month a year earlier, according to Statistics New Zealand. Exports rose 15% to $3.2 billion, while imports rose 3.6% to $3.6 billion. The annual trade balance, which is typically a deficit in the 12 months ended August, was a surplus of $866 million.

"Much of the increase in export revenues over the past year owes to the global economic recovery - particularly the strength from key trading partners in the Asia Pacific," said Jane Turner, economist at ASB.

"The overall level of exports was a bit weaker than expected in August, perhaps suggesting some momentum for exports may be fading."

Exports were led by a $136 million increase in the value of milk powder, butter and cheese sales to $496 million in August. Milk prices hit a bottom in July last year, and have more than doubled since then. Logs, wood and wood articles exports rose 19% to $249 million. Meat and edible offal, the country's second biggest export behind milk powder, fell 7.6% to $242 million, the lowest value for an August month since 1998.

Turner said the bank expects exports will continue to drive growth over the next year, supporting Reserve Bank Governor Alan Bollard's favoured export-led recovery.

Australia's appetite for local dairy products underpinned its 20% increase to $913 million in August, while China continued to increase its purchases of New Zealand exports, which rose 15% to $252 million.

Imports of capital goods reported the biggest increase last month, up 12% to $597 million, with an extra $66 million spent on machinery and plant.

Businesswire.co.nz

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