Overseas Merchandise Trade (December, Final)

Data Flash (New Zealand)

Key Points

A merchandise trade surplus of $23m was recorded in December. A provisional surplus of $26m had been reported on 29 January. The average balance for December over the past 10 years is a deficit of $81m.

The trade surplus for the year to December was $977m, compared with a deficit of $1,535m during the previous year.

The value of exports for the three months to December was 2.2% lower than a year earlier, the first time this measure has been negative since February 1999, with falling prices now more than offsetting modest growth in volumes.

The value of imports was unchanged from the estimate published on 29 January.

The estimated level of imports for the three months to December was 2.5% 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 December (see table below). This breakdown conformed to our expectations.

With the exception of forest products - likely buoyed by the boom in construction in Australia - all key export categories were weaker than a year earlier. Notably, dairy receipts were 12% weaker than last year - not too different to the estimated fall in dairy prices according to the ANZ commodity price index. Aside from weaker dairy exports, manufactured exports appear to have remained subdued. Exports of electrical machinery and equipment posted another poor result, declining 14% compared with a year earlier. This likely reflects the ongoing slump in capital spending following the 11 September terrorist attacks.

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 growth in export volumes remaining subdued, export commodity prices declining, a resilient domestic economy continuing to push up the demand for imports, and oil prices looking to have bottomed, the current account deficit 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. However, the annual deficit (for the 2001 calendar year) is expected to decline from 3.5% of GDP to a shade below 3% of GDP as the high Q4 2000 deficit drops out of the calculation.

Next Release: January (28 February). Preliminary Estimate: Trade Balance, +$70m mth/+$952m ann

Darren Gibbs, Senior Economist, New Zealand

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