NZ monthly trade deficit at 5-year high in August as infant formula exports fall

Wednesday 25th September 2013

New Zealand's monthly trade deficit was the biggest in almost five years in August as the one-off arrival of a drilling platform skewed imports, and export growth was minimal in a month where the country's food safety was under heightened global scrutiny.

The monthly deficit widened to $1.19 billion in August from $771 million in July and $812 million a year earlier, according to Statistics New Zealand. That was the biggest ever deficit for the month of August, and the widest monthly shortfall since September 2008. Economists polled by Reuters were predicted a monthly deficit of $743 million.

The annual deficit widened to $2.06 billion from $830 million in July, more than the $1.62 billion shortfall predicted.

Exports increased 0.6 percent to $3.33 billion in August from a year earlier. That reflected a 45 percent gain in international sales of logs, wood and wood articles to $385 million and a 51 percent lift in aluminium and aluminium articles to $133 million, offset by a 1.8 percent dip in milk powder, butter and cheese exports to $577 million, an 8.4 percent decline in meat and edible offal to $273 million, and a 37 percent slide in crude oil to $79 million.

Foreign sales of preparations of cereals, flour and starch dropped 28 percent to $52 million in August. That was led by infant food preparations in a month when Chinese regulators tightened up quality control and as the country's biggest company, Fonterra Cooperative Group, was caught up in a contamination scare that proved to be groundless.

Imports advanced 9.7 percent to $4.52 billion in August from a year earlier, bolstered in part by a $195 million one-off import of a drilling platform, one of three due to arrive in New Zealand waters in coming months. Mechanical machinery and equipment imports rose 13 percent to $572 million, vehicles, parts and accessories climbed 25 percent to $598 million, and fertilisers more than tripled to $99 million.

"While imports were boosted by a large one-off item for the second straight month, the underlying picture is still of a strong uplift in business investment, which had been through something of a flat patch over the year to June," Westpac Banking Corp senior economist Michael Gordon said in a note. "This actually bodes well for future growth in New Zealand, though it will weigh on the trade balance in the meantime."

Second-quarter gross domestic product figures last week showed a 5.7 percent lift in business investment to $7.75 billion, led by gains in transport equipment and other construction, such as infrastructure.

China continued its growing dominance among New Zealand's trading partners, with exports to the world's most populous nation up 21 percent to $545 million in August from a year earlier and imports up 38 percent to $958 million.

With exports to nearest neighbour Australia down 12 percent to $722 million and imports down 9.1 percent to $576 million in the month, China has more annual two-way trade at about $16.11 billion compared to Australia's $16 billion.

BusinessDesk.co.nz

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