BusinessDesk: Balance of trade remains favourable in August

New Zealand’s balance of trade continued to show relative strength as high world prices for traditional export commodities held up and imports remained subdued.

For the month of August, Statistics New Zealand reported a trade deficit of $641 million, or 19% of the value of exports, compared with an average monthly deficit for August at 27% of exports in the previous five years.

For the year to August, the country continued to report a surplus, at $1.1 billion, compared with $873 million in the year to August 2010 and a longer term pattern of deficits for August years, averaging around 10% of exports.

Total imports were up 15% for the month of August, compared to the same month a year earlier, at $4.1 million, led by petroleum and products, while exports were up 10% to $3.4 billion, led by increases of around $70 million each in receipts from meat, crude oil and dairy commodities.

“The trend for import values has been flat since March 2011,” the official statistician said in a statement.

“The trend in export values has increased 26% since its most recent low point in October 2009.”

China was the largest market for increased export receipts, up 47% ($117 million) in August, led by log exports; exports to Australia were up 12%, thanks primarily to crude oil exports for refining across the Tasman. Gold kiwifruit helped push exports to South Korea up 30%, or $28 million, while the U.S. showed the largest decrease, down 9.8%, spread across several commodities.

Imports from China were also up the most from any country, increasing 14% in a month when KiwiRail took delivery of new Chinese-built rolling stock, while an 8.2% increase in imports from Australia was led by cereals and raw sugar.

(BusinessDesk)

Here is comment from ASB economist Jane Turner on the implications of this latest trade data.

This month’s deficit was larger than expected due to stronger imports.  The lift may be partly due to the timing of relatively lumpy import categories.   We continue to expect the (seasonally-adjusted) trade balance to remain in surplus over the coming year.  Export receipts, although dipping slightly in August, remain robust.  International prices for dairy and meat, although easing slightly, have remained elevated.

In addition, manufactured exports continue to grow.

However, the current uncertainty around the global outlook does cast a shadow over NZ’s robust export performance.   Weaker trading partner growth is likely to slow demand for some exports.  Nonetheless, we continue to expect some of our core commodity exports (such as meat and dairy) to continue to hold up relatively well.