September 30, 2010

Dairy exports narrow New Zealand's August deficit

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

The trade deficit was NZD437 million (US$323 million) in August, smaller than the NZD500 million (US$369 million) forecast and down from NZD717 million (US$529 million) in the same month a year earlier, according to Statistics New Zealand.

In contrast to the monthly trade deficit, the annual trade balance was a surplus of NZD866 million (US$639 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.

Exports were led by a NZD136 million (US$100 million) increase in the value of milk powder, butter and cheese sales to NZD496 million (US$366 million) in August.

Milk prices hit a bottom in July last year, and have more than doubled since then.

Meat and edible offal, the country's second biggest export behind milk powder, fell 7.6% to NZD242 million (US$178 million), the lowest value for an August month since 1998.

Turner said she 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 NZD913 million (US$674 million) in August, while China continued to increase its purchases of New Zealand exports, which rose 15% to NZD252 million (US$186 million).