Strong exports drive May trade surplus of NZ$814 mln

Strong exports of milk powder and crude oil pushed the value of goods exported to a new high of NZ$4.2 billion in May creating a surplus of NZ$814 million for the month.

(Update adds economists' comments and detail of export and import growth to specific countries).

Statistics New Zealand said the value of goods exported in May was up NZ$238 million, or 6%, from May 2009. It was only the third time that monthly exports have topped NZ44 billion.

“Unsweetened whole milk powder and crude oil were the major contributors to the increase in exports,”  Statistics New Zealand business statistics manager Louise Holmes-Oliver said.

Milk powder, butter, and cheese exports rose NZ$102 million, or 12.6%. Holmes-Oliver said unsweetened whole milk powder rose NZ$119 million, driving this increase with both higher quantity and price contributing to the rise.

At 10.8% the value of goods imported did, however, rise at a higher rate, by NZ$330 million to NZ$3.4 billion. Petroleum and products, and vehicles, parts, and accessories were the leading factors in the increase.

The May trade surplus was NZ$814 million, or 19.4% of the value of exports compared with with an average May trade surplus of 9.3% of exports over the last decade.

Holmes-Oliver said the trend for goods exported was now at a similar level to its November 2008 peak, having risen 15.2% since September 2009 after a 10-month decline.

JP Morgan Chase Bank economist Helen Kevans said the trade surplus was slightly narrower than expected, because of a larger than forecast rise in imports. Economists' had expected a surplus of about NZ$850 million.

Kevans said the trade data carried few direct implications for the next Reserve Bank interest rate decision in July, where she expects another 25 basis points rate increase to 3%.

"However, the RBNZ has been placing a greater emphasis on the role of export earnings and booming trading partner growth to supplement sluggish domestic demand," said Kevans.

"The May trade report confirms this message - the year-to-date trade balance remained in surplus for the second straight month, at NZ$91 million. In April, the annual trade balance ventured into surplus for the first time since mid-2002." 

ASB economist Jane Turner noted the strong trade surplus has been a key driver in the dramatic narrowing of the current account deficit over the past year. Turner said art of the recovery in export prices could be attributed to the recovery in global demand, and was therefore likely to be sustained over the next few years, especially  forestry prices. Exports of logs, wood, and wood articles rose NZ$44 million, or 19.5%, in May.

"However, the recent strength in dairy prices is more a result of tight market conditions," Turner said. 

"With reports of increased production from the US, these prices at these levels are less likely to be sustained. Nonetheless, the stronger export incomes will be a key contributor to the economic confidence and recovery over the next year."

By country of destination, the biggest increase in exports was to Australia. Exports there rose NZ$137 million, or 17.6%, driven by a doubling of crude oil exports, with both the quantity and price higher. Exports to Japan showed the second largest increase, up NZ$112 million,  or 46%, led by aluminium and aluminium articles, and crude oil.

Third was China with exports there rising NZ$92 million, or 25.8%. This increase was dominated by milk powder, butter, and cheese.

The strongest rise in imports came from the United Arab Emirates, up NZ$119 million, or 506%, and Russia, up NZ$82 million, due to crude oil imports.