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Data Flash - Overseas Merchandise Trade

Data Flash (New Zealand) Overseas Merchandise Trade - May 2000

Key Points

Provisional data suggest a trade surplus of $151m for the month of May compared with a revised deficit of $25m in April 2000 and a surplus of $86m in May 1999. The annual deficit was $3,375m in May, compared with $3,441m in April.

The median market expectation had been for a surplus of $225m for the month. Exports were significantly stronger than market expectations. However, imports were stronger still, coming in some $250m ahead of the median expectation.

In recent months exports have been revised up $30-50m with the release of the final estimate. A continuation of this pattern could see the trade surplus revised up to around $180-200m on 11 July.

Export values in May were 28.3% ahead of the same month last year. Furthermore, for the three months to May, exports were 19.1% ahead of the same period in 1999 - the strongest 3-month growth rate recorded since 1992. Detailed export data will not be available until the final May merchandise trade estimates are published. However, it is likely that increased agricultural exports explain a large part of the better than expected outcome.

Import values in May were 26.1% ahead of the same month last year. Compared to May 1999, the increase in imports reflected a $152m increase in capital imports, a $72m increase in imports of crude oil, a $174m increase in imports of other intermediate goods and a $59m increase in imports of consumption goods. Imports for the three months to May were 20.9% higher than in the same period of 1999.

Commentary

We estimate that import prices in May were around 15% higher than a year earlier. Given that import values rose 26% over the same period, this implies that volumes increased by around 10%. Some of the growth in volumes can be explained by increased imports of aircraft and parts, which tend to exhibit a volatile monthly profile. Excluding capital transport equipment, import values in May were 21% higher than a year earlier, suggesting underlying growth in import volumes of around 5% - close to the annual rate of growth in GDP. Therefore, underlying import penetration ratio has changed little over the last year, with domestic producers unable to improve their market share notwithstanding the weak level of the currency.

With domestic demand slowing, the rate of growth in import volumes is also expected to slow. We expect an improvement in the trade balance to lead to a modest improvement in the current account balance over the coming year. The current account deficit is expected to fall to around 6.8% of GDP by Q1/2001, from 8.2% of GDP in Q1/2000.

Darren Gibbs, Senior Economist, New Zealand (64) 9 351 1376

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