Export growth up 13% after a booming May month of 30%

By David Barber

Friday 14th July 2000

Latest trade figures out this week show export growth nearing an encouraging 13% on an annual basis, rising to a galloping 20% in the last quarter and a whopping 30% in May, compared with the same month last year.

But close analysis reveals a mixture of good and bad news in the export sector as the country's importing boom continues, causing a trade deficit of more than $3.3 billion in the May year, though the gap in the balance trend is steadily reducing.

Low world commodity prices left returns from New Zealand's biggest single export, dairy products, unchanged over the 12 months despite a 15% fall in the New Zealand dollar against the US currency in which they are traded.

Rising international meat prices lifted returns from that sector 17.5% over the year.

Sales of the third-biggest export item, timber, rose nearly a third as Asian markets continued to recover from the regional financial crisis of 1997-98.

Total exports to Asia rose 18% during the year and showed strengthening growth, posting rises of 31% in the May quarter and more than 40% in the month.

Even Japan, New Zealand's third-largest customer whose troubled domestic economy has left it trailing growth figures elsewhere in Asia, matched the quarterly and monthly increases.

But there was a mixed performance from the manufacturing sector which economists are relying on to reduce the country's dependence on volatile commodity prices.

Manufactured commodities like aluminium, wood and methanol are showing strong growth.

But this is likely to be driven by price and the low exchange rate and is therefore unsustainable.

Sales of so-called elaborately transformed manufactures, which have added value and are job-creating, are increasing at a reasonable level of about 19% but this rate of growth has been static for the last four months, according to Manufacturers' Federation analyst Peter Crawford.

What is more, New Zealand has a trade deficit in these items and imports are growing at a similar rate, indicating a structural weakness in the economy that is limiting export-led growth.

On a brighter note, there is evidence of significant breakthroughs into the lucrative American market from some perhaps unlikely quarters - manufacturers of automotive components, electrical and electronic equipment and industrial machinery.

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