NZ January trade deficit $833 million, worse than expected

By NZPA

Monday 26th February 2007

New Zealand posted a worse than expected monthly trade deficit of $833 million in January, pushing the annual shortfall out to $6.03 billion.

The median forecast of economists polled by Reuters had been for a monthly deficit of $671 million, and an annual figure of $5.9 billion.

Releasing the data today, Statistics New Zealand (SNZ) put imports at $3.31b, barely changed from December but 7% up on a year earlier.

Exports at $2.48b were lower than for any month since January 2006, but 12.5% ahead of the year ago figure.

The January monthly trade balance amounted to 33.7% of exports.

SNZ said the 12.5% rise in exports to $2.48b was the largest annual increase for a January month, by both value and%age, since January 2001, and the highest value on record for a January month.

But trend values for recent months indicated exports had flattened.

Milk powder, butter and cheese contributed more than a third ($95m) of the total increase in merchandise exports, with the largest increase within that category being whole milk powder, up $59m.

The next largest contributors to the increase were meat and edible offal, up $38m, and aluminium, up $34m.

Offsetting the rise in exports was a $24m fall in the ships, boats and floating structures category.

The main cause of the drop was a 55.2% fall in large motor boats and commercial fishing vessels, compared with the previous January, SNZ said.

Among imports, the largest increase by commodity, compared to January 2006, was a $51m (13.8%) rise in mechanical machinery and equipment.

Other large increases came from iron and steel and articles, and electrical machinery and equipment -- up $36m and $34m respectively.

The largest decrease was a $75m (23.1%) drop in aircraft and parts.

For the three months ended January, merchandise goods exports were up 10.5% to $8.2b, from the same period a year earlier.

Milk powder, butter and cheese, which were up 12%, continued to dominate the increase, contributing about a quarter of the total $777m increase for merchandise exports.

Imports for the three months were up 3.5% to $10.2b, with electrical machinery and equipment up $113m and iron and steel and articles up $89m.

Today's data pushed the already strong NZ dollar a little higher against the greenback, up a tenth of a cent to US70.70c within 10 minutes.

Westpac economist Doug Steel said the main surprise was that imports were a little stronger .

"It seems like the consumer is in good heart, with consumption imports rising 13.5% for the year," he said.

Goldman Sachs JBWere economist Shamubeel Eaqub agreed the import growth was unexpected.

Imports continued to be underpinned by solid growth in consumption and intermediate goods, he said.

While the Reserve Bank would not like that, it would be encouraged by the increase in capital good imports.

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