Strong dairy prices dominate increase in goods exports, contribute to small merchandise trade surplus in Jan, Stats NZ says

New Zealand posted a small merchandise trade surplus of NZ$11 million in January, and the first annual surplus for a January year since 2002, Statistics New Zealand said today.

The monthly surplus was close to market expectations of even exports and imports over the month, ASB economist Jane Turner said.

The total value of goods imported rose NZ$396 million, or 14% from January 2010, to NZ$3.3 billion.

“Higher imports of mechanical and electrical machinery and equipment contributed almost half of this rise in January 2011,” Stats NZ overseas trade manager Neil Kelly said in a media release.

Meanwhile, the total value of goods exported rose NZ$136 million, or 4.3% from a year ago, to NZ$3.3 billion during the month.

“Milk powder, butter, and cheese exports (mainly unsweetened whole milk powder) dominated this increase – up NZ$93 million (9.8%),” Kelly said.

In the year to January there was a merchandise trade surplus of NZ$865 million, or 2% of exports. This was the first surplus for a January year since 2002, Kelly said.

Quake disruption

ASB's Turner said the latest Christchurch earthquake last week would likely affect trade data for February.

"In particular, manufacturing exports are likely to be lower, with production on hold for the time being. Other exports and imports could also be affected reflecting the closure of Lyttelton port over the past week," Turner said.

See the release from Stats NZ:

The total value of goods imported in January 2011 increased $396 million (14 percent) from January 2010, to $3.3 billion, Statistics New Zealand said today.

“Higher imports of mechanical and electrical machinery and equipment contributed almost half of this rise in January 2011,” overseas trade manager Neil Kelly said.

The trend for import values has mainly increased since the most recent low point in September 2009, but is still 12 percent below its peak in September 2008.

The total value of goods exported in January 2011 was up $136 million (4.3 percent) from January 2010, to $3.3 billion.

“Milk powder, butter, and cheese exports (mainly unsweetened whole milk powder) dominated this increase – up $93 million (9.8 percent),” Mr Kelly said.

The trend for export values has mainly increased since the most recent low point in October 2009.

In January 2011, the trade balance was a small surplus of $11 million or 0.3 percent of the value of exports.

The annual trade balance for the year ended January 2011 was a surplus of $865 million (2.0 percent of exports). This is the first surplus for the year ended January since 2002.

Here is the reaction from ASB economist Jane Turner:

The trade balance for January was close to market expectations, with an $11 million surplus.  Adjusting for seasonal patterns, the balance registered a surplus of $71 million in January (StatsNZ are reporting seasonally-adjusted figures for the first time this month).

Exports

Over the past year, gains in dairy prices, meat prices and a recovery in forestry demand have underpinned the increase in exports receipts.  Over the past month, exports increased 5.9% over January (seasonally adjusted) underpinned by a 2.7% increase in dairy product (higher prices) and a 12% increase in fish (higher volumes).  Oil exports increased 62%, although oil exports are not seasonally adjusted and shipments tend to be lumpy. Forestry exports fell 16%, unwinding the previous month’s increase, while meat exports fell 4.1%. 

Looking ahead, we expect that exports of dairy and forestry will 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.  The underlying fundamentals for manufacturing exports remain robust.  However, the recent Christchurch earthquake may see some temporary disruption to exports over February and March.

Imports

Imports fell 1.8% seasonally adjusted over January, and down 1.9% excluding oil imports.  This follows an 11% increase in the previous month.  This volatility may be a result of the new AirNZ 777 aircraft imported in December.

StatsNZ note the trend in imports has been improving since September 2009, and up 18% from its low point.  However, imports remain 12% lower than their peak in September 2008, reflecting the weakness in domestic demand.

Implications

Commodity exports continue to perform well, with high dairy prices a large factor underpinning the trade surplus over the past year.  As a result, the export sector remains a key driver of economic recovery.  International dairy prices are likely to remain strong over the next year, 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.

Looking ahead, February’s trade data are likely to be disrupted as a result of Tuesday’s earthquake. In particular, manufacturing exports are likely to be lower, with production on hold for the time being.  Other exports and imports could also be affected reflecting the closure of Lyttelton port over the past week.