NZ annual trade gap widens on oil imports

Thursday 27th November 2008

New Zealand's annual trade deficit widened last month as crude oil shipments drove up imports, outpacing a gain in exports of dairy products, meat and logs.

The deficit widened to $5.22 billion in the year ended October 31, from $5.05 billion in the 12 months to September 30, according to Statistics New Zealand. In the month of October, the deficit narrowed to $942 million from $1.26 billion in the previous month.

New Zealand's exports are dominated by agricultural products whose prices are sinking as the global economy slumps. The impact of sliding prices is being offset by a weakening New Zealand dollar, though prospects are for the trade gap to worsen, economists say. Prices of export commodities fell 7.4% last month, the biggest slump in two decades, according to ANZ National Bank.

"The underlying trade deficit trend continues to worsen and the outlook is uncertain given the downside risk to exports from a global recession, and the downside risks to imports from a local recession" said Shamubeel Eaqub, economist at Goldman Sachs JBWere.

Imports rose 15% to a record $4.78 billion in October from the same month last year. The pace of growth is likely to slow as the economy's downturn continues, Eaqub said. Exports rose 14% to $3.83 billion.

The economy contracted in the first half of the year, the first recession since 1998, and may have continued shrinking through the fourth quarter. The central bank slashed the official cash rate by 100 basis points to 6.5% last month and economists predict it will make another cut of the same size on December 4.

By Jonathan Underhill

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