Overseas Merchandise Trade - June 2000

Data Flash (New Zealand)

Overseas Merchandise Trade - June 2000

Key Points

Statistics NZ reported a provisional trade deficit of $52m for the month of June compared with a revised surplus of $192m in May. The annual deficit was $3,189 in June, compared with $3,328 in May.

The provisional outcome represents a $139m improvement on the deficit of $191m reported in June 1999. The outturn for May represented a $106m improvement on May 1999.

The median market expectation had been for a surplus of $9m for the month. Exports were again significantly stronger than market expectations, but imports were stronger still. A very strong rise in imports of capital plant was the key factor leading to the worse than expected outcome.

Over the past six months exports have been revised up $30-50m with the release of the final estimate. A continuation of this trend would see the June trade deficit fall to $20m or better on 9 August.

For the second consecutive month, export values in June were over 30% ahead of the same month last year. Furthermore, for the three months to June, exports were up 25% ahead of the same period in 1999 - the strongest 3-month growth rate recorded since 1989. Detailed export data will not be available until the final June merchandise trade estimates are published.

Import values in June were 20.6% ahead of the same month last year. Compared to June 1999, the increase in imports reflected a $134m increase in capital imports, a $47m increase in imports of crude oil, a $140m increase in imports of other intermediate goods and a $52m increase in imports of consumption goods. Imports of passenger motor vehicles were unchanged from a year earlier.

Commentary

Although the headline balance was, again, a little disappointing, an analysis of the composition of the outturn yields a more positive story. For the second month in a row export volumes have come in well above market expectations, while strong growth in capital spending is consistent with our view that prospects for the economy remain brighter than some commentators have suggested, driven initially by strong export performance. Imports of consumption goods have weakened - falling 1% seasonally adjusted in Q2 (ex cars) - which is consistent with weaker household spending in Q2. We expect an improvement in the trade balance to lead to a modest improvement in the current account balance over the coming year. The current account deficit is expected to fall to around 7.1% of GDP by Q1/2001, from 8.2% of GDP in Q1/2000.

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