Lower import values improve trade balance

By Phil Boeyen, ShareChat Business News Editor

Friday 26th October 2001

A rising dollar appears to have helped New Zealand record a much improved trade deficit in September.

Figures show the value of imports for September was $2.703 billion, a drop of 1% on the previous quarter and giving a trade deficit of $53 million for the month compared to a deficit of $609 million in September last year.

"This reflects an appreciation of the exchange rate used on the import documentation in the September 2001 month," says Statistics New Zealand.

Deutsche Bank says the provisional merchandise trade deficit of $53 million was much better than the median market expectation of a $365 million deficit.

Senior economist, Darren Gibbs, says while export values were broadly in line with expectations, import values were exceptionally weak despite a very sharp rebound in oil imports during the month.

"The value of exports for the three months to September was 12.9% higher than a year earlier. We think that favourable price movements - driven by increases in world prices and the weaker NZD - explain the bulk of this growth.

"The estimated level of imports for the three months to September was just 0.3% higher than a year earlier. Allowing for price movements, core import volumes appear to be growing at around a 2% annual rate - less than the rate of GDP growth over the same period."

Mr Gibbs says part of the reason for the weak import values can be explained by the New Zealand Customs Service's practice of converting foreign currency amounts into NZ dollars and means that the NZ dollar value of imports in September is probably understated.

"Although the average NZD/USD exchange rate in September was 2.8% lower than in August, the Customs Service recorded a 5.3% appreciation for conversion purposes (reflecting their use of a pre-11 September exchange rate).

Mr Gibbs also says the terrorist attacks in the US may have impacted on trade flows.

"This includes the direct impact due to the disruption to air travel and, perhaps late in the month, the cancellation of import orders as businesses became concerned about the impact of global recession on the outlook for the New Zealand economy.

"Imports from the US were very weak in September, being some 41% lower than the same month last year, although September 2000 imports were inflated by the import of a large aircraft and substantial imports of telecommunications equipment."

Deutsche Bank says today's result remains consistent with the trend improvement in New Zealand's current account deficit that it has been forecasting for some time. The bank is picking a third quarter current account balance deficit or $4.2 billion or 3.7% of GDP compared with 4% of GDP in the June quarter and 6.7% in the third quarter last year.

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