Overseas trade for January in balance

One economist says the Christchurch earthquake could mean some disruption to exports over the next month. Photo / Supplied

New Zealand's overseas trade was in balance in January as rising dairy and meat exports covered higher imports of plant and machinery.

Exports of $3.3 billion were $136 million higher than in January 2010, driven by a $93 million or 10 per cent increase in dairy exports and a $30 million or 7 per cent rise in meat shipments. The overall increase in export receipts was 4.3 per cent and came despite a 3.9 per cent increase in the trade-weighted exchange rate over the year. Imports, also $3.3 billion, were $396 million or 14 per cent up on a year earlier.

Nearly half of the increase, $187 million, was in mechanical and electrical equipment, much of it related to wind power. But consumer goods imports also increased, by $40 million or 5 per cent.

For the year ended January 31, merchandise trade was in surplus by $865 million, which is down on the annual surplus of $1.1 billion recorded in December.

Goldman Sachs economist Philip Borkin noted that in seasonally adjusted terms exports of meat and logs were both lower than in December, reflecting lower volumes.

The 4 per cent drop in meat exports, when seasonally adjusted, followed four months of strong rises.

But log export volumes had plunged 40 per cent from December, Borkin said.

"With China taking the majority of our log exports this could be worth watching to see if it is just monthly volatility or the start of something more enduring."

Looking ahead, ASB economist Jane Turner expects dairy and forestry exports to remain robust, underpinned by strong global commodity prices and strong demand from China.

"Meat exports are likely to be hampered back by weak volumes, despite strong prices," she said.

"The underlying fundamentals for manufacturing exports remain robust. However, the Christchurch earthquake may see some temporary disruption to exports over February and March."

International dairy prices were likely to remain strong over the next year, Turner said, with large wheat shortages underpinning high grain prices which tend to also be supportive of dairy prices.

"However, for the broader economy the trickle down of wealth from higher commodity prices has been muted by producers opting to pay down debt."