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NZ trade deficit smaller than expected on exports of dairy products

Monday 29th November 2010

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New Zealand posted a smaller-than-expected trade deficit in October as the nation lifted exports more than expected, led by a surge in shipments of milk powder, butter, cheese and logs.

The trade deficit was $319 million last month, from a revised deficit of $457 million in the previous month, according to Statistics New Zealand. Imports rose 16% to $4 billion while exports gained 24% to $3.7 billion in the latest month. A deficit of $438 million has been forecast in a Reuters survey.

Exports were $3.7 billion in October, exceeding the forecast $3.3 billion, as China bought more milk powder and Australia took in more crude oil from New Zealand. The Reserve Bank wants to see a rebalancing of the economy toward the tradables sector and away from consumer consumption and housing, and Governor Alan Bollard said this month that was being held back by a high kiwi dollar.

"For the time being, NZ commodity export prices remain at high levels, which should provide support to export incomes over the next year," said Jane Turner, economist at ASB, in a report. Still, "dairy volume growth may potentially weaken this season due to dry weather, and cap the increase in the annual trade balance."

For the year ended in October, the trade surplus was $1.2 billion, amounting to 2.8% of exports. The last annual surplus of more than $1 billion was in the 12 months ended Sept. 30, 1994, when it reached $1.3 billion.

Exports to China surged 79% in the latest month, reflecting increased sales of whole milk powder and logs. Shipments to Australia climbed 15%, on crude oil and dairy products.

Crude oil drove the increase in imports, rising 47%, while processed industrial products such as bitumen, aluminium oxide and palm oil cake rose 12%.

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