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NZ's exports bolstered by Tui oil field production

New Zealand's exports bolstered by Tui oil field production

New Zealand's trade balance for the month of September posted an upside surprise of -NZ$544 million (JPMorgan -NZ$650 million, consensus -NZ$700 million), thanks to an expected spike in the petroleum exports category. As mentioned in last week's Global Data Watch, the main theme from today's trade report was the temporary spike in exports of petroleum and related products, owing to the second full month of production from the Tui oil field. The oil field will have a short life-span, however, with most of the economic impact being felt in the 3Q of 2007, before slowing to a trickle in early 2008. The boost from the oil field is likely to add around 0.2% to 3Q GDP. Furthermore, the value of exports was the highest ever recorded for a September month.

Looking underneath the export oil spike, there was a sizable fall in the seasonally adjusted number of milk and meat exports (both over the month and quarter). The value of merchandise imports was solid at NZ$3.5 billion, and was the highest value ever posted for a September month. The largest contributors to the increase in imports came from mechanical machinery and equipment (up NZ$34 million), and parts and accessories (up NZ$29 million).

Over the September quarter, New Zealand's trade balance made a marked improvement. The quarterly (seasonally adjusted) level of exports bounced back after a poor 2Q performance and imports declined for the third straight quarter with a reduction in imported capital goods. The importation of consumption goods remains elevated, and shows that the desired cooling in domestic demand sought by RBNZ is still a work in progress and is by no means 'sustained.' The RBNZ is looking for a sustained slowdown in domestic demand to tame inflation pressures.

Jarrod Kerr
J.P. Morgan Securities Australia Limited

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