November exports soar 19 per cent

Photo / Supplied

The value of November 2010 export goods was $589 million - 19 per cent - higher than November 2009, Statistics New Zealand said today.

The total value of goods exported in November 2010 was $3.7 billion.

"The trend returned to 2008 levels in May and has remained at those levels," overseas trade manager Neil Kelly said.

He said the trend in export values had risen since October 2009 and although slowing in recent months, remained similar to the previous high in late 2008.

The major contributor to the rising export stats was dairy, with milk powder, butter, and cheese call up.

The total value of goods imported during November was up $495 million - 15 per cent - from November 2009, to $3.8 billion.

The annual trade balance for the year ended November 2010 was a surplus of $1.3 billion, which is 3.1 per cent of exports.

This is the first surplus for a November year since 2001.

ASB Bank economist Jane Turner said the rising annual trade surplus over the past year was "testament to the recovery in export earnings, particularly from strong dairy prices and improved forestry export earnings."

Turner said the strength of emerging Asian economies was a large factor behind the strength in NZ export earnings.

"Indeed, exports to China are up 46 per cent on year-ago levels largely due to increased exports of dairy and logs. Continued growth in China should underpin demand for commodities over the next year."

However, weather remained a risk to agricultural production volumes - although recent rain has helped improve soil moisture conditions.

"The strength in commodity prices, particularly dairy, has been a positive development for NZ agricultural exporters over the past year. However, looking ahead, recent substantial increases in other food commodities, particularly sugar and wheat, will begin to flow through as higher import prices, slightly reducing New Zealand's still-favourable international purchasing power."

As an example, New Zealand drivers would have not appreciated the recent increase in petrol prices ahead of the holiday season, said Turner.

Further, higher prices for feed would limit the ability of farmers to cushion the impact of dry conditions and potentially reducing agricultural volumes.

"These factors remain key risks to a relatively fragile economic recovery. Nevertheless, the trade balance has been improving over the past year for the right reasons: increased export earnings."

Mechanical machinery and equipment, and vehicles, parts, and accessories, were the leading contributors to the increase in imports.

The trend for total merchandise imports has fallen slightly since June 2010 and is now 17 per cent below its peak in September 2008.

Goldman Sachs NZ economist Philip Borkin said Chinese demand was playing an increasingly important role in New Zealand's trade stats.

"High commodity prices, Chinese demand and to a lesser degree subdued domestic demand constraining imports continue to see the annual trade balance push further into positive territory," he said.

"As has been the case for some months now, it is demand from China that continues to support NZ's export performance. Export growth to China was up 46 per cent year-on-year in November, largely driven by dairy and log exports."

"Like Australia, NZ is becoming more exposed to the 'China story'," said Borkin, with China taking 11 per cent of our merchandise exports in the 12 months to November 2010.

"This shows flexibility on the part of exporters to target the fastest growing parts of the world. However, it also means that NZ is more vulnerable to China's domestic issues and we believe how successful the Chinese officials manage to be in containing the current bout of inflation without slowing growth substantially needs to be watched closely in this part of the world."

Borkin said today's trade figures showed Import demand had begun to recover.

"However, the subdued domestic recovery to date is constraining growth, with consumption good imports the laggard relative to other categories."

Encouragingly, capital goods imports had risen off depressed levels to be up 22 per cent year-on-year, said Borkin.

"As a component of this, plant and machinery imports are up 17 per cent year-on-year, which portends of a gradually improving business investment environment, which we believe will be a theme for the coming year as business put better balance sheets to work."

In November 2010, the trade balance was a deficit of $186 million, which is 5.1 per cent of the value of exports.

This compares with an average November deficit of 24 per cent of exports for the previous five years.