Dairy drives 15pc trade boost

Higher prices for dairy products have helped to bolster New Zealand's trade balance. Photo / Greg Bowker

A strong export performance is behind a $3.2 billion turnaround in the trade balance over the past year.

Figures released by Statistics New Zealand (SNZ) yesterday show exports were up 15 per cent, or $405 million, in August from a year earlier to $3.2 billion, led by higher prices for dairy products.

Imports last month were up 3.6 per cent, or $126 million, to $3.6 billion, leaving a trade deficit in August of $437 million, or 14 per cent of the value of exports, SNZ said.

The August trade balance is typically negative, with last month's deficit half the average of the five August months before 2010.

For the year ended August the annual trade surplus was the highest since March 2002 at $866 million, or 2.1 per cent of exports. The five previous August years had an average deficit of 15 per cent of exports.

The surplus for the latest year compares with an annual deficit of $2.36 billion just a year earlier.

ASB economist Jane Turner said strength in export commodity prices and strong demand from key trading partners had been responsible for the trade surplus during the past year.

But the overall level of exports in August had been a little weaker than expected, perhaps suggesting some momentum for exports might be fading. Recent anecdotes suggested demand for forestry had eased slightly in recent months, Turner said.

"Nonetheless, export commodity prices remain strong. In particular, dairy prices have held up at very high levels, which has increased Fonterra's confidence in achieving next year's forecast payout."

Strong export prices should continue to support export revenues, even if volumes started to ease.

Much of the rise in export revenue in the past year was due to the global economic recovery, particularly the strength in key trading partners in the Asia Pacific area, Turner said.

SNZ's figures showed the milk powder, butter and cheese category recorded the largest increase in exports last month compared with August last year, rising $136 million, or 38 per cent, due to higher prices.

For the three months to August exports rose $1.4 billion (15 per cent) from a year earlier while imports lifted $526 million (5.1 per cent).

- NZPA