Trade gap widens as spend-up continues

The trade account went from bad to worse last month as $1.42 worth of imports crossed the wharves for every $1 of exports.

The monthly deficit of $935 million, although worse than economists expected, was in line with the average of the past six months.

But ANZ National Bank's acting chief economist, Cameron Bagrie, said that trend was woeful, and it would not materially improve until consumers stopped their "I want it all and I want it now" borrow-and-spend behaviour.

The deficit pushed the trade gap for the year ended January to a record $7.1 billion, up from $6.5 billion for the year to December.

January's imports at $3.13 billion were swollen by oil and aircraft, up $330 million and $240 million respectively on January last year.

Higher oil prices and lumpy imports of aircraft account for $1.8 billion of the $3 billion increase in imports for the whole year to January.

Imports of consumer goods were 12.9 per cent higher, but Deutsche Bank chief economist Darren Gibbs sees that more as evidence of increased import penetration, aided by the strong dollar, rather than as an indication of unbridled consumer spending.

"I don't think spending is up anything like that much. It's at the expense of local producers."

Imports of cars were down nearly 20 per cent on January last year and at a two-year low.

Imports of plant and machinery were the weakest for nearly a year and down 0.8 per cent on their level of January last year.

Bank of New Zealand economist Craig Ebert said such signs that businesses were pulling back on investment as profits were squeezed, would only mean that capacity constraints in the economy (which retard growth and threaten inflation) would be that much slower to abate.

Exports at $2.19 billion were down 2.6 per cent on January last year, mainly reflecting lower shipments of meat and dairy products.

The drop in dairy exports last month is thought to relate to the timing of shipments - exports for the three months ended January were 4.3 per cent higher than in the same period a year ago.

Meat export receipts, by contrast, were down on a quarterly basis as well, by 7.6 per cent, partly reflecting a retreat from what had been historically high prices in world markets.

However, Gibbs said that excluding meat and dairy products, exports were 5.8 per cent higher.

GROWING GAP

* Trade gap a record $7.1 billion for the year.

* Measured against exports, the monthly deficit is the worst for 30 years.

* Imports of machinery flat but consumer goods going strong.