Exports yield best monthly trade surplus for years

Photo / Kenny Rodger

Exports exceeded imports by a record $1.1 billion last month, boosted by high commodity prices, reversing a four-month declining trend in the annual trade balance.

With only 76c paid out for imports for every $1 of exports, it was the largest monthly trade surplus in percentage terms for 18 years.

The annual trade balance was in surplus by $1.2 billion, up from $734 million in March and the highest since November last year.

Exports at $4.6 billion were 17.4 per cent higher than in April last year, while imports were up just 7.2 per cent (partly because the naval vessel HMNZS Otago was imported last year).

The monthly surplus was nearly twice the $600 million market economists had expected.

Compared with April last year, dairy exports were 3 per cent higher, meat 13 per cent higher and forest products 15 per cent higher. Exports of manufactured goods were 22 per cent above levels a year ago.

Although the New Zealand dollar appreciated 3.2 per cent in the year to April on a trade-weighted basis, it fell 3 per cent against the Australian dollar and Australia is the largest market for manufactured exports.

Goldman Sachs economist Philip Borkin said: "While the appreciation of the New Zealand dollar in the past few months has been notable and we believe a period of consolidation likely at some stage, today's data reinforce one major reason why the dollar is at elevated levels to begin with."

ASB economist Jane Turner said the strength in the export data, particularly in commodities, highlighted the export-led nature of the economic recovery.

"However, despite the increase in incomes, the rural sector has remained relatively cautious, opting to reduce debt rather than increase investment and other spending. This has muted the stimulatory impact on the remainder of the economy."

Turner expects commodity exports will continue to do well. "The key issue for the Reserve Bank to monitor is when increased rural incomes and confidence translate to increased spending and investment."

On the imports side, imports of plant and machinery were up 13.8 per cent on April last year, suggesting business investment might be lifting from its depressed post-crisis levels.

Imports of consumer goods were up a more modest 4.6 per cent.

Car imports were 15.4 per cent lower. Deutsche Bank chief economist Darren Gibbs said that was more likely to reflect supply constraints in Japan than a lack of demand in New Zealand.

"We think it's likely imports will pick up over coming months as businesses look to rebuild inventories, including in quake-damaged Christchurch, lowering the trade surplus somewhat compared to that recorded in April," he said.