November 30, 2010

 

New Zealand's trade figures show US$1-billion surplus

New Zealand's annual trade balance for January to October showed a surplus above US$1 billion for the first time in 16 years, highlighting the importance of strong dairy prices and demand from China.

 

Figures from Statistics New Zealand (SNZ) show the country had a trade deficit of US$319 million in October alone, amounting to 8.7% of the value of exports, compared with an average deficit of 29% of exports over the previous five October months. The October trade balance has always been in deficit.

 

The annual trade balance for the year ended October was a surplus of US$1.2 billion or 2.8% of exports, compared with an average deficit of 14% of exports for the five previous October years.

 

The last annual surplus above US$1 billion was in the year ended September 1994, but that surplus accounted for a much larger percentage of exports, at 6.4%, SNZ said.

 

Exports in October were up US$723 million, or 24%, from October 2009 to US$3.7 billion, while imports rose US$541 million, or 16%, to US$4 billion.

 

ANZ bank said the figures showed high commodity prices were supporting the economy.

 

Export prices and volumes could now deteriorate, with growth in many of this country's key Asian trading partners slowing sharply in the third quarter, while poor spring conditions in this country were not boding well for agricultural export volumes in the next year.

 

SNZ put milk powder, butter and cheese exports up US$418 million (62%) from a year earlier, driven by a US$242 million rise in unsweetened whole milk powder, with both price and quantities higher.

 

ASB economist Jane Turner said dairy prices had remained high in recent months and should continue to support dairy incomes in the next year, although recent dry weather was reportedly already beginning to hamper production. As for imports, recovery in demand had been relatively subdued, in line with gradual recovery in domestic demand, Ms Turner said.

 

An 11% rise in plant and machinery imports, compared with a year ago, pointed to a rise in investment demand, while a 6.8% rise in imports of consumption goods suggested retailers were becoming increasingly confident of a recovery in consumer spending.

 

Goldman Sachs & Partners economist Philip Borkin said the strength in export growth continued to be driven by China.

 

On a three-month average basis, he estimated export growth to China was up more than 48% from a year before.

 

Dairy and forestry accounted for more than 40% of exports to China, and those commodities had benefited the most from Chinese demand. But even excluding those two sectors, exports to China were still estimated to be up 14%.