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Deutsche Bank - Trade Surplus

Key Points

A trade surplus of $191m was recorded in the month of May, slightly better than the $151m provisional surplus published on 27 June. An upward revision to export values accounted for the improved result. The annual deficit was $3,332m.

The monthly result represented a $105m improvement on the surplus recorded in May 1999. However, the surplus remained below the 10 year May average of $303m.

Export values in May were 30.2% ahead of the same month last year, while values over the three months to May were 19.9% higher than during the same period last year.

Export prices are estimated to have risen close to 11% over the same period.

Today's release provides the first breakdown of the source of export growth in May. Comparing the three months to May with the same period last year, increases were recorded for dairy products ($112m), meat products ($216m), forest products ($215m), aluminium ($85m) and mechanical and electrical machinery ($91m). Other exports increased by $515m.

By destination, the strongest value growth occurred in exports to the US, Australia and Japan. Strong growth was also recorded in exports to the Republic of Korea, China, Hong Kong, Singapore, Indonesia and France.

Commentary As set out in our latest economic forecasts, a combination of strong world growth and a very competitive exchange rate is expected to boost export performance over the next three years. Growth in export volumes is expected to average over 5.5% over the period.

With domestic demand slowing, the rate of growth in import volumes is also expected to slow. The expected improvement in net export volumes is also likely to be supplemented by an improvement in the terms of trade, leading to an improvement in the trade balance. However, the increasing cost of funding a growing stock of net liabilities - reflected in a growing deficit on the investment income balance - means that the overall improvement in the current account balance is likely to be modest. The current account deficit is expected to fall to around 6.1% of GDP by Q1 2002, from 8.2% of GDP in Q1/2000.

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