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Merchandise Trade Balance (August 2001)

Data Flash (New Zealand)
NZ: Merchandise Trade Balance (August 2001)

Key Points

A provisional merchandise trade deficit of $97m was recorded in August, compared with a deficit of $371m in August 2000. The average deficit for August over the past 10 years is $242m. The annual trade surplus was $325m, compared with a deficit of $3,089m a year earlier. The result was a better than the median market expectation of a $250m deficit and our own expectation of a $170m deficit. While export values were in line with our expectations, import values were a little weaker than expected, largely due to a very weak level of oil imports during the month.

The value of exports for the three months to August was 15.0% 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 3-4% annual rate. A breakdown of the export data by type will be released on 11 October.

The estimated level of imports for the three months to August was 7.6% higher than a year earlier. Excluding `lumpy' imports of capital transport and military equipment, `core' imports for the 3 months to August were 5.7% higher than a year earlier. Allowing for price movements, core import volumes 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 August were 17% stronger than in the previous three-month period. However, in light of recent events in the US, and the uncertainty that this has created regarding the global economic outlook, there is some risk that investment begins to taper off - at least temporarily - towards the end of this year as investment plans are put on hold.

Commentary

Excluding the impact of lower oil imports - which we believe is likely to be reversed next month - the overall trade balance and the composition of imports was in line with 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 11 months.

Today's result remains consistent with the trend improvement in New Zealand's current account deficit that we have been forecasting for some time. As discussed in a separate note released today, we expect the annual current account deficit to head lower over the remainder of 2001 - to around 3.3% of GDP - before moving modestly higher over 2002 (reflecting a weakening profile for exports of both goods and services and a deterioration in the terms of trade).

Next Trade Release: August (Exports), 11 October

This, along with an extensive range of other publications, is available on our web site http://research.gm.db.com

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