NZ trade surplus NZ$378 mln in Sept quarter; Third in a row as imports fall more than exports

New Zealand’s seasonally adjusted overseas trade balance was a surplus of NZ$378 million in the September 2010 quarter, the third consecutive quarterly trade surplus, Statistics New Zealand said today.

“While both exports and imports values decreased, imports decreased slightly more (from the June quarter),” Stats NZ overseas trade manager Neil Kelly said.

ASB economist Jane Turner said the third consecutive surplus was testament to the economy's export-led recovery.

"NZ’s export sector remains a key driver of growth for the NZ economy," Turner said.

"However, demand in the domestic sector remains sluggish, with business and consumer confidence low and credit appetites weak.  Given this weakness in the domestic economy, the RBNZ is likely to leave the OCR unchanged until March 2010," she said.

Unadjusted figures show New Zealand had an overseas trade deficit of NZ$532 million in the September 2010 month, slightly better than the NZ$561 million deficit in September 2009. The September 2010 deficit was wider than market expectations of around NZ$450 million.

“September months are typically deficits,” Stats NZ said.

In the year to September 2010, New Zealand had a trade surplus of NZ$921 million, up from a surplus of NZ$892 million in August and a NZ$1.7 billion deficit in the year to September 2009.

Here are ASB economist Jane Turner's comments on the trade figures:

Exports fell 2.5% over the quarter, following strong growth over the first half of the year.  Contributing to this fall included:

• 23% decline in meat exports, largely related to lower volumes.  
• 9.2% decline in forestry-related products, due to a mix of lower volumes and prices.  However, this decline follows a number of months of strong increases.  Overall, demand conditions for NZ forestry products remains firm.
• 4.5% decline in mechanical machinery and equipment.  Exports in this category may have been disrupted due to September earthquake, given the large manufacturing base in Canterbury. Nonetheless, confidence in manufacturing exports has eased over recent months.

Providing some offset to these declines included a 4.8% increase in dairy exports (due to higher prices), and an 8.5% increase in aluminum exports (due to stronger volumes).

Imports fell 3.1% over the quarter, following strong growth over the first half of the year. Largely contributing to the decline was a fall in oil-related exports. Oil is imported in large irregular shipments, which can cause fluctuations in the series.  However, oil imports for both August and September were unusually low.  Given that monthly oil imports contain an estimated component and are subject to revision once official data are reconciled, we would not be surprised to see oil imports revised up in future releases (or, instead we see a strong increase in oil imports over Q4).

Looking past the weakness in oil imports, other import categories were reasonably strong and point to further improvement in underlying domestic demand.  In particular, capital imports increased 22%, pointing to a recovery in business investment over Q3. Consumption goods increased 2.4%.  The strength in consumption imports may relate to retailers’ anticipation of increased sales ahead of the GST increase in October.

Implications

The third consecutive trade surplus is testament to the export-led recovery NZ is currently experiencing.  Although, some areas of exports eased over Q3, this follows a very strong performance over the first half of the year.  In addition, areas such as dairy continue to benefit from strong commodity prices.

NZ’s export sector remains a key driver of growth for the NZ economy.  However, demand in the domestic sector remains sluggish, with business and consumer confidence low and credit appetites weak.  Given this weakness in the domestic economy, the RBNZ is likely to leave the OCR unchanged until March 2010.

(Updates with chart, economist comments)