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Overseas Merchandise Trade (November), Final

Data Flash (New Zealand)
Overseas Merchandise Trade (November), Final

Key Points

A merchandise trade deficit of $341m was recorded in November. A provisional deficit of $351m had been reported on 21 December. The average deficit for November over the past 10 years is $300m.

The trade surplus for the year to November was $875m, compared with the $2,543m deficit reported just 12 months earlier.

The value of exports for the three months to November was 1.0% higher than a year earlier. However, exports for the month of November were 3.4% lower than a year earlier, with falling prices now beginning to offset modest growth in volumes.

The value of imports was unchanged from the estimate published on 21 December. ? The estimated level of imports for the three months to November was 4.6% lower than a year earlier, with higher import volumes offset by lower import prices (due to lower oil prices and a modest recovery in the NZD from its year-earlier lows).

Commentary

The new information in today's release was the composition of export receipts during November (see table below), which in aggregate were weaker than we had expected. As we thought likely, weaker than expected dairy exports accounts for much of the weak overall outcome. In part, this reflects the substantial weakening in dairy prices over recent months. However, the result also seems to have been influenced by unusually low volumes of butter exports during the month - a result that is likely to be reversed next month.

Aside from weaker dairy exports, manufactured exports appear to have remained subdued. Following a weak October, exports of electrical machinery and equipment posted another poor result, declining 29% compared with a year earlier. This no doubt reflects the renewed decline in capital spending following the 11 September terrorist attacks. Exports of aluminium are running 17% weaker than a year earlier.

Our estimates suggest that, taking account of seasonal factors, the current account deficit was running at a little over 2% of GDP in mid-2001 - a level not seen since the late 1980s. However, with export volumes remaining subdued, export commodity prices declining and a resilient domestic economy continuing to push up the demand for imports, the current account balance now appears to increasing. Allowing for seasonal factors, a current account deficit of over 3.5% of GDP seems likely to be recorded in Q4 2001 (although the annual deficit will decline from 3.5% of GDP to around 3% of GDP as the high Q4 2000 deficit drops out of the calculation).

Next Release: December (29 January). Preliminary Estimate: Trade Balance, $65m mth/+$1,010m ann

Darren Gibbs, Senior Economist, New Zealand

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