Overseas Merchandise Trade (Imports, February)

Data Flash (New Zealand)
Overseas Merchandise Trade (Imports, February)

Key Points

Statistics NZ reported a provisional trade surplus of $413m for the month of February compared with a surplus of $43m in February 2000. The average surplus for February over the past 10 years is $154m. The annual deficit declined to $1,064m compared with a deficit of $3,313m a year earlier. The market expectation had been for a surplus of around $190m, while our own forecast was for a surplus of $350m.

Although both exports and imports were lower than expected, the better than expected balance largely reflects much lower than expected import values. Imports of plant and machinery, intermediate goods and consumption goods were all very weak. However, this followed a stronger than expected level of imports in January. Therefore, it would be premature to draw strong conclusions at this stage.

The value of exports for the three months to February was 24.4% higher than a year earlier. With export prices estimated to be running at around 19% higher than a year earlier, today's outcome suggests that export volumes are expanding at an annual rate of around 5%. A breakdown of the export data will be made available with the final trade release on 14 March.

The estimated level of imports for the three months to February was unchanged from a year earlier. Excluding `lumpy' imports of capital transport and military equipment, `core' imports for the 3 months to February were 12.2% higher than a year earlier. We estimate that import prices are running a little over 10% higher than a year earlier, implying that core import volumes are broadly flat.

Commentary

The latest trade outcome was a little better than we had expected, with the surprise due largely to weaker than expected imports - the opposite outcome to that in January. Thus, in all likelihood, the very weak level of imports in February simply reflects the volatility often seen in monthly trade data, rather than indicating a significant slowing in domestic demand. If this conclusion is correct, we would expect to see a bounce-back in imports in March. However, a weaker outcome, especially for the plant and machinery and intermediate goods components, perhaps accompanied by a moderation in business confidence, would raise questions about the degree to which the global slowdown may already have begun to impact on the New Zealand economy.

The better than expected trade balance means that the improving trend in the current account deficit remains intact, notwithstanding last week's worse that expected Q4 outcome (which reflected a worsening in the investment income balance). As the chart below shows, the monthly trade balance has improved markedly in recent months. We expect a further solid surplus to be recorded in March. As a result, we expect that annual current account balance to decline to around 4.5% of GDP in Q1 2001 and to around 3% of GDP over the coming year.

Darren Gibbs, Senior Economist, New Zealand

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