Exports push May trade surplus to three-year high

11.45am

A whopping increase in the value of goods exported in May saw the month's trade balance soar to a surplus of $656 million, a three-year high which smacked economists' expectations of a $91 million surplus clear out of the park.

The surplus continues a string of dazzling economic news including a Friday's announcement that the economy grew at a sizzling 2.3 per cent in the March quarter against expectations of 1.5 per cent.

The day before, the current account deficit came in much lower than forecasts -- 4.2 per cent of GDP instead of 4.7 per cent.

Statistics New Zealand today said the provisional value of merchandise imports for May was $2.71 billion, while exports for the same period were valued at $3.37 billion.

Economists polled by Reuters had expected figures of $2.87 billion and $2.92 billion respectively. SNZ said the estimated value of merchandise exports was 22.7 per cent higher than the same month last year.

"Early estimates indicate that dairy products, meat and fruit are the main contributors to the higher value of exports for May 2004 compared with May 2003," SNZ said.

Detailed export information will be released on July 7. Imports although lower than expected by economists were up 2.7 per cent on May 2003.

On an annual basis, today's figure gives a provisional value of merchandise imports of $32.79 billion for the year ended May 2004, up 2.6 per cent on the same period last year.

The estimated value annual value of merchandise exports for the year at $29.42 billion gives an estimated annual trade deficit of $3.37 billion, or 11.4 per cent of exports. Today's trade surplus is the largest since May 2001 and is the latest in a string of data to surprise economists on the upside.

The news sent the kiwi dollar a little higher -- to US63.70c from its US63.65c opening. Dealers said it was likely to put further upward pressure on the currency.

At the end of last week after the better-than-forecast data, economists were saying any indecision by the Reserve Bank whether to hike interest rates once or twice had been banished.

Now the question may be whether the next interest rate hike on July 29 will be a half a percentage point rise rather than a quarter of point.

Reserve Bank Governor Alan Bollard has already forecast inflation will rise above the 1-3 target band for much of next year, and today's figures may worry him that the economy and inflation will boil over.

- NZPA