A much worse than expected April trade deficit highlighted ongoing weakness in New Zealand export sector, but there were some mitigating factors, economists said today.
The country posted a $212 million trade deficit for the month, many times larger than the $13m deficit economists had on average forecast.
However, if one-off items such as a $220m oil drilling and processing vessel were excluded, there would have been a monthly surplus of $19m.
The annual trade deficit was $6.02 billion, 4.3 per cent higher than a month earlier but 12.6 per cent lower than the previous April year.
Exports in April rose 5.3 per cent to $3.175b, while imports rose 13.8 per cent to $3.39b.
The monthly deficit of 6.7 per cent of exports compared with an average shortfall of 3.7 per cent over the past 10 years.
The Reserve Bank (RBNZ) would have noted an apparent steadying in imports of consumption goods, which account for a quarter of all merchandise imports, although they were still 3.8 per cent higher than a year ago.
Also heartening was a record $664m worth of plant and machinery equipment imports, up 50.3 per cent on April 2006.
"There are signs of a response by businesses to capacity constraints and skill shortages," ANZ economists said.
Strong commodity prices, particularly for dairy products, meant exports held up reasonably well despite the high New Zealand dollar.
"The Reserve Bank will remain concerned at the level of imbalance present in the economy and continue to desire a shifting of drivers of growth from the domestic to external sectors of the economy," ANZ said.
"They will take some comfort that consumption good imports are not accelerating, although on the same note, there is little evidence to suggest that they are moderating."
Goldman Sachs JBWere economist Shamubeel Eaqub said the export sector, which remained weak, could be further harmed by further interest and exchange rate increases.
"We believe there are emerging signs of weakness in the domestic economy and expect the RBNZ to hold the OCR steady at 7.75 per cent for the balance of 2007," Mr Eaqub said.
