Merchandise Trade Balance, Imports (July 2001)

Key Points

- A provisional merchandise trade deficit of $46m was recorded for the month of July, compared with a deficit of $126m in July 2000. The average deficit for July over the past 10 years is $151m.

- An annual trade surplus of $65m was recorded in July - the first annual surplus on a merchandise trade basis since April 1995.

- The result was a little weaker than the median market expectation of a $26m surplus (our own expectation was for a $25m deficit). However, both exports and imports were quite a bit stronger than expected.

- The value of exports for the three months to July was 20.1% higher than a year earlier. We think that favourable price movements - driven by increases in world prices and the weaker NZD - explain the bulk of this growth, with the volume of exports expanding at around a 3% yoy pace. A breakdown of the export data by type will be released on 10 September.

- The estimated level of imports for the three months to July was 10.3% higher than a year earlier. Excluding “lumpy’ imports of capital transport and military equipment, “core’ imports for the 3 months to July were 9.2% higher than a year earlier. Allowing for price movements, core import volumes now appear to be growing at around a 3% annual rate - broadly in line with growth in the overall economy.

- Looking at the breakdown of imports, we are encouraged that plant and machinery has continued to recover from the weaker levels seen earlier this year. Although little changed from the same time last year, plant and machinery imports in the three months to July were 23% stronger than in the previous three-month period. Imports of non-oil intermediate goods were strong in July and both consumption and motor vehicle imports remained robust.

Trade Balance Trade Summary

$m Jul 2001 Jul

2000 % 3 Mths to

Jul 01 3 Mths to Jul 00 %

Exports 2,750 2,310 19.0 8,771 7,303 20.1

Imports 2,796 2,436 14.8 8,022 7,273 10.3

Cap. Plant 424 410 3.3 1,225 1,243 -1.5

Cap. Trans. 89 46 92.9 358 313 14.4

Oil/Spirit 247 196 26.2 651 558 16.7

Oth Intermed. 1121 964 16.2 3,194 2,847 12.2

Consumption 661 605 9.2 1,840 1,672 10.0

Passeng. Cars 220 214 2.7 685 632 8.3

Trade Balance -46 -126 749 30

Source: DB Global Markets Research, Statistics NZ Source: DB Global Markets Research, Statistics NZ

Commentary

- The overall trade balance was fairly close to our expectations. The monthly deficit, which is likely to be maintained over the balance of this year, reflects the beginnings of the usual seasonal wind down in commodity exports and gearing up of pre-Xmas imports. The monthly trade balance has bettered its year earlier level in each of the last 10 months.

- However, both export and import values were stronger than expected. In the case of exports, we suspect that higher prices may account for a significant part of the stronger than expected result. In the case of imports, we think that stronger volumes may be relatively more important.

- Today’s result remains consistent with the trend improvement in New Zealand’s current account deficit that we have been forecasting for some time. We expect the annual deficit to nudge just below 4.0% of GDP in Q2, from 4.8% in Q1. These figures will be reported on 27 September. A further reduction towards 3% of GDP is expected by year-end.

Exports and Imports - Trend Monthly Balance: Month on Month Year Earlier

Source: DB Global Markets Research, Statistics NZ Source: DB Global Markets Research, Statistics NZ

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