Annual trade surplus hits $1.2 billion

Photo / Kenny Rodger

The trade balance continued to improve last month, driven by a rise in exports.

New Zealand imported $1.09 worth of goods for every $1 of exports, but October is always deficit month. The deficit of $319 million compared with $501 million in October 2009 and $994 million two years ago.

For the year ended October there was a trade surplus of $1.2 billion, a turnaround from the average $3.5 billion deficit over the previous 10 years, in only one of which (2001) was the trade balance in the black.

Exports last month at $3.7 billion were 24 per cent higher than in October last year, despite an exchange rate which was almost unchanged (up 0.3 per cent on a trade-weighted basis).

Most export commodities recorded an increase, led by a 62 per cent ($418 million) rise in dairy products, Statistics New Zealand said.

Forest products exports rose 29 per cent ($60 million), but meat exports declined 6.6 per cent or $17 million despite stronger prices recently.

Imports at $4 billion were 16 per cent up on October last year. More than a quarter of the increase ($130 million) was in crude oil imports, which is imported in large irregular shipments and can throw the monthly data around.

Plant and machinery imports were up 11 per cent. "[But] at $551 million in the month this is only modestly above the average over the past 24 months," Goldman Sachs economist Philip Borkin said.

Imports of consumer goods were up 6.8 per cent on October last year. "That suggests retailers are becoming more confident in a recovery in consumer spending," ASB economist Jane Turner said. The annual surplus of $1.2 billion is an increase from $990 million in the year ended September and $890 million in the year ended August.

"The rising annual surplus highlights the export-led recovery that has supported the economy over the past year," Turner said. While commodity export prices remained high, anecdotal evidence suggested dry weather was already beginning to hamper production, which might limit growth in dairy exports this season, she said.

Borkin said that with the annual trade balance at a 16-year high some progress had clearly been made towards correcting the poor state of the external accounts, highlighted by Standard & Poor's last week.

"High commodity prices and Chinese demand are assisting at the moment but much of it has been due to cyclically weak imports. Plenty of work is still required to structurally shift the economy to a more export-driven framework."