Annual $312m surplus the country's first for two years as dairy exports to China surge.

Surging dairy exports to China have pushed the annual trade balance into surplus for the first time in nearly two years.

Exports exceeded imports by $306 million or 8.1 per cent last month, Statistics New Zealand reported. It was the first January to be in surplus for six years.

It pushed the annual trade balance into the black by $312 million, the first surplus since March 2012. As recently as August last year the annual deficit was $2.17 billion.

Exports to China last month were $1.2 billion, 31 per cent of total exports and more than twice the value of exports to the next largest market, Australia.


Over the 12 months ended January exports to China grew by $3.7 billion or 54 per cent, more than offsetting a $1.2 billion decline in exports to the next three biggest markets: Australia, the United States and Japan.

But the increase in exports is almost entirely explained by two commodities: dairy exports have risen by $2.9 billion or 25 per cent over the past year and forest products by $750 million or 24 per cent.

This has led economists to warn of heightened "concentration risk", as exports are increasingly concentrated in a few commodities and a few countries.

Dairy, meat and forest products make up 48 per cent of all goods exports. But New Zealand Institute of Economic Research principal economist Shamubeel Eaqub points out that they make up 74 per cent of exports to China.

"Increasing concentration increases volatility in exports, from shifts in demand, prices or weather events," he said.

The increasing value of dairy exports is driven by higher prices rather than volumes. Compared with January last year dairy exports were up $605 million or 56 per cent (three-quarters of it whole milk powder), while volumes were up 9.2 per cent, Statistics NZ said.

Westpac economist Anne Boniface said that in seasonally adjusted terms dairy export volumes eased a touch last month, after very strong growth in the December quarter.

Compared with January last year forest product exports rose by a third or $65 million.


"While higher prices were part of this, it's mainly a reflection of substantially higher production. No wonder there are price pressures in the local timber industry already," Ebert said.

On the imports side (and looking at the three months ended January to reduce the volatility in monthly numbers) imports were 6 per cent higher than a year ago. That included an 8.4 per cent rise in imports of non-transport plant and machinery and a 1.7 per cent increase in consumer goods. Imports of cars were 18.4 per cent higher.