Trade deficit unexpectedly shrinks in May

Worsening terms of trade are tipped to push the current account deficit up towards 5 per cent of GDP by the end of this year. Photo / Richard Robinson

New Zealand's annual trade deficit unexpectedly shrank in May as exports rose more than forecast and imports lagged predictions.

The country's trade deficit fell to $2.57 billion in the 12 months through May, according to Statistics New Zealand. That was lower than the $2.66 billion annual deficit in April and the $2.9 billion forecast by economists in a Reuters survey.

For the month of May, New Zealand had a surplus of $350 million, beating expectations for a $100 million deficit.

May exports declined 4.7 per cent to $4.36 billion in May from the year earlier month, ahead of expectations for $4.27 billion. The export decline was led by a 28 per cent drop in milk powder, butter and cheese.

Meanwhile, imports in May fell 7 per cent to $4.01 billion in May from a year earlier, less than the $4.29 billion expected. Imports of intermediate goods declined, led by crude oil, and capital goods.

See the latest trade stats here: