NZ merchandise trade surplus NZ$230 mln in June month, below market expectations of NZ$400 mln, Stats NZ figures show

A merchandise trade surplus of NZ$230 million, or 5.8% of exports, in the June month was lower than the NZ$400 million expected, but continued the trend of monthly merchandise trade surpluses since January, figures released by Statistics New Zealand show.

The New Zealand dollar fell about 30 basis points immediately after the news at 10:45am, from 86.41 USc to as low as 86.11 USc. 

Meanwhile, quarterly figures show strength in New Zealand exports continued through the June quarter, although economists are warning this could fall off during the second half of the year as demand drops off.

Exports of goods worth NZ$3.969 billion for the June month more than offset imports of around NZ$3.739 billion, both up 4.7% from June 2010, when there was a trade surplus of NZ$221 million.

Exports of milk powder, butter and cheese rose 11.3% from a year ago to NZ$888 million in June, while exports of the second biggest category, meat and edible offal, rose 10.6% to NZ$492 million from June 2010.

There were also large rises in the two biggest import categories, with petroleum and petroleum product imports up 9.3% to NZ$723 million, and mechanical machinery and equipment imports rose 7.6% to NZ$466 million.

In the year to June there was a trade surplus of NZ$1.021 billion, up from NZ$593 million in the year to June 2010.

May not as strong as first thought

May’s trade surplus was revised down by Statistics New Zealand by NZ$54 million to NZ$551 million, which had followed April’s record high of NZ$1.149 billion on the back of strong commodity and manufactured goods exports.

It is expected exports may start to ease in the second half of 2011 as demand from particularly China diminishes, ASB economists said before the figures were released. Commodity prices have shown signs of weakness this month, while a surging Kiwi dollar could also affect export performance, although imports would become cheaper.

Export trend hits new high

Meanwhile, seasonally adjusted quarterly figures released this month show exports of about NZ$12.2 billion in the June quarter up 4.5% from the March quarter, following rises of 3.7% in the previous two quarters.

“The trend for goods exported, which reflects the long-term behaviour in export values, has increased 28% since the September 2009 quarter,” Stats NZ said in a media release.

“The trend in exports has reached a new high, surpassing the previous peak in the March 2011 quarter,” Stats NZ said.

Imports of about NZ$11.8 billion were down 1% from the March quarter, giving a seasonally adjusted trade surplus of NZ$362 million, or 3% of exports, for the June quarter.

Economist reaction

ASB economist Jane Turner said there was cause for concern on the export front as the New Zealand dollar rose against its Australian counterpart and on anecdotes of slowing demand in China:

Strong export commodity prices were a key feature in underpinning the trade surplus over Q2.  More recently, dairy prices have been easing over recent months and the appreciation in the NZD has further reduced prices in NZD terms.  Meanwhile, the recent lift in the NZD/AUD will take the edge off the strong competitiveness of the NZ manufacturing sector in the Australian market.  

Also concerning are anecdotes of slowing demand in China, particularly for raw commodities such as forestry.  NZ’s economic recovery has been supported by stronger export incomes over the first half of 2011.  However, there are concerns that support for export incomes may wane over the second half of the year, as commodity prices moderate from elevated levels and global growth goes through a soft patch.  

We believe these uncertainties will see the RBNZ holding off increasing the OCR until December 2011, by which time the domestic economy will have had more time to recover.

(Updates with ASB comment, NZ$ reaction)