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October Trade Balance: Exports Surging



New Zealand's trade balance improved strongly in October, with import growth remaining at high leve ls but exports surging $260M in the month.

Merchandise imports were $2.95 billion in October, in line with oure xpectations but higher than th ose of the market. This was an increase of 18.6% y/y on October 1999 import levels, almost unchange d from last month's 18.7% growth. October's results follow September's record imports of $3.05B. Th is month's fall in imports of $102M was due to the dropping out of a large aircraft from last month 's figures and a $96M fall in mineral fuel imports - partly offset by higher machinery, fertliser a nd motor vehicle imports.

Despite the lower aggregate level of merchandise imports this month, consumption good imports hit a record high of $780M in October, up 21% on a year ago. Crude oil imports remained solid at $148M, but were lower than the previous three months. Passenger motor vehicle imports picked up $45M from a low September level. Plant and machinery imports remained above $400M for the fourth consecutive month, and are 42% higher than a year ago.

Preliminary estimates put merchandise exports at around $2.72 billion, up a very strong 32.5% on a year ago (and well up on September's 22.1% y/y). Exports were $260M higher than in September. On a trend basis, merchandisee xports are up 26% on October 1999. A breakdown of export components will be available in the final October trade estimates on December 11.

Stronger export growth saw the preliminary merchandise trade deficit narrow from September's -$586M n.s.a. to a preliminary estimate of -$225M n.s.a. in October. This was a little better than the me dian market forecast (-$250M) and considerably better than ours. It represents a solid improvement on last October's $430M deficit. Likewise the rolling 12 month trade deficit fell $205M to $2.91B i n October, its first time below $3 billion since last November. The trend monthly trade balance, wh ich excludes import items of $100 million org reater (such as large aircraft and ships), has been i mproving steadily for 10 months.

Revised October trade numbers, along with the quarterly overseas tradei ndices, are due for release on 11 December.

Grant Fitzner, Senior economist, HSBC

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