July trade deficit bigger than expected

Monday 30th August 2010

New Zealand posted a bigger-than-expected merchandise trade deficit last month as exports fell, stoking concern the key drivers of dairy products and forest products may be coming off the boil.

The trade deficit was $186 million in July, from a revised surplus of $214 million in June, according to Statistics New Zealand. Exports of $3.57 billion lagged behind the forecast $3.69 billion in a Reuters survey, while exports of $3.57 billion exceeded the forecast $3.7 billion.

While exports slipped back, the monthly value was still a record for July and the annual balance remained in surplus at $570 million, keeping the nation on track for the export-led recovery favoured by the Reserve Bank. The value of dairy products climbed 32% from the same month of 2009 while logs and wood were up 24%.

“The trade balance underwhelmed the market slightly, with growth in exports beginning to slow,” said Jane Turner, economist at ASB.

“Recent commodity price data point to prices in dairy beginning to ease of high levels, which will reduce support for the trade balance over the next year,” she said.

“In addition, there have been tentative signs that forestry demand has eased (although prices remain firm), while manufacturing confidence has eased off recent highs.”

The New Zealand dollar traded recently at 71.14 US cents, down from 71.29 cents immediately before the trade report. The trade-weighted index fell to 66.55 from 66.66.

Economists had expected a monthly trade deficit of $10 million, according to Reuters.

Businesswire.co.nz

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