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Merchandise Trade - March 2000

Data Flash (New Zealand)
Merchandise Trade - March 2000

Key Points

Provisional data pointed to a trade deficit of $38m for the month of March compared to market expectations of a $117m surplus. The annual deficit rose to $3.5bn compared with $3.3bn in February.

Weaker than expected exports and stronger than expected imports contributed roughly equally to the disappointing outturn.

Detailed export data will not be available until the final March merchandise trade estimates are published on 15 May. Export values in March were 11.7% ahead of the same month last year.

Import values in March were 18.6% higher than the same month last year. The increase was spread throughout most of the main economic categories:

Around one-sixth of the increase was due to higher imports of capital transport goods while similar contributions stemmed from increased imports of consumption goods and from increased imports of passenger motor vehicles;

Around one-fifth of the increase was due to higher imports of crude oil and motor spirit, largely reflecting the effect of oil price rises; and

Around one-third of the increase was due to higher imports of other intermediate goods.

By country of origin, significant increases occurred in imports from Saudi Arabia (oil), Morocco, Australia, the US, Japan and China.

Commentary

The split between growth in volumes and prices will not be known until the Overseas Trade Indexes for Q1 are published in June. To the extent that growth in prices are a key factor, this implies upside risk to the RBNZ's inflation forecasts (the Bank seriously underestimated the 5.5% growth in import prices recorded over Q4). On the other hand, to the extent that higher import values stems from higher volumes, this could suggest either stronger domestic demand or further gains in import penetration, the latter occurring despite the low NZD.

Today's outturn was broadly in line with our forecasts. We expect the current account deficit to fall marginally to 7.8% of GDP in Q1/2000, compared with 8.0% of GDP in Q4/1999. Thereafter we forecast a marked turnaround in the trade balance to lead to a gradual improvement in the current account deficit. We expect the deficit to narrow to around 6% of GDP by Q4/2001.

The NZD displayed little reaction to today's numbers, holding up well despite a further decline in the AUD.

Darren Gibbs, Senior Economist

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