Dairy drives trade surplus

Dairy exports are up 29 per cent on a year ago. Photo / Brett Phibbs

Strong export commodity prices have enabled the country to record its first annual trade surplus for nearly eight years.

Exports exceeded imports by one-sixth or $656 million last month, $200 million more than the market expected.

It pushed the trade balance for the year ended April into the black, by $116 million, the first annual surplus since July 2002, Statistics New Zealand said.

Goldman Sachs JB Were economist Philip Borkin said the most encouraging thing about that was the last time a positive annual trade balance was achieved, the New Zealand dollar was below 50c against the US dollar.

Exports last month, at $4 billion, were 9 per cent higher than in April last year.

Considering the trade-weighted exchange rate had risen by about 17 per cent since then, that was a very solid result, Deutsche Bank chief economist Darren Gibbs said.

Dairy exports are up 29 per cent on a year ago. ASB economist Jane Turner said that reflected a continued recovery in dairy prices and Fonterra was relatively optimistic on the outlook for prices too.

"However, there are some uncertainties ahead, particularly the potential for increased production from the United States over the next six months."

Log and wood exports rose 34 per cent, with both prices and volumes up. Meat exports were up 12 per cent on a year ago, following 10 months of falls. But Bank of New Zealand economist Doug Steel said meat exports were likely to have been boosted by destocking by farmers as dry conditions took hold earlier in the year.

"Also we would expect the volume of dairy exports to turn negative over coming months, reflecting the lack of late-season milk flow. Even so, buoyant prices should maintain positive growth in export values."

Dairy and forest products underpinned a 44 per cent rise in exports to China over the past year.

Imports were flat on a year ago at $3.3 billion, even with the importation of $95 million-worth of warships last month. Imports of consumer goods were down 7 per cent on a year ago, while imports of capital plant and machinery were 9 per cent lower.

But Steel said that if allowance was made for impact on import prices from the large appreciation in the New Zealand dollar over the past 12 months, imports of consumer, capital and intermediate goods had all increased.

"We expect more underlying growth in the short term as economic recovery continues."

Gibbs also expects domestic demand to strengthen over coming months as an improving labour market, tax changes and strong commodity prices drive a recovery in household income growth.