New Zealand’s Trade Deficit Widens

New Zealand’s annual trade deficit widened more than economists forecast in December as a deepening global recession damped exports., Bloomberg 1/28/2009 6:12:56 PM

The gap increased to NZ$5.62 billion ($3 billion) in the 12 months ended Dec. 31 from NZ$5.23 billion in the year through November, Statistics New Zealand said in Wellington today. The median estimate in a Bloomberg News survey of eight analysts was for a NZ$5.3 billion shortfall.

The central bank cut its benchmark interest rate to a record-low 3.5 percent today, and said it has room for further reductions to combat fallout from a slump in the nation’s major overseas markets. New Zealand has been in recession since the start of 2008 as declining incomes for farmers and exporters stall spending and prompt companies to fire workers.

Auckland-based Fonterra Cooperative Group Ltd., the world’s largest dairy exporter, yesterday cut its milk price forecast for the third time in four months and delayed paying a dividend, citing declining demand.

Sales of milk powder, butter and cheese, which make up almost one-fifth of overseas shipments, fell 12 percent from a year earlier, today’s report showed. Shipments of fruit, aluminum and crude oil also dropped.

Exports overall rose 4.5 percent from a year earlier, the smallest increase since March, to NZ$3.85 billion. The one-off sale of a large aircraft bolstered exports by NZ$148 million. Overseas shipments make up about 30 percent of the economy.

Imports fell for a second straight month to seven-month low of NZ$4.2 billion as domestic demand eased.

Economists monitor the rolling, 12-month trade balance because of volatility in the month-on-month figures, which aren’t seasonally adjusted. December’s trade deficit was NZ$347 million compared with a NZ$39 million surplus a year earlier.

The Reserve Bank of New Zealand cut its interest rate by 1.5 percentage points, more than most economists expected.

World prices of butter, meat and other commodities dropped 7.4 percent in December from a year earlier, according to an index compiled by ANZ National Bank Ltd. In New Zealand dollars, the index fell 6.1 percent.

New Zealand’s Trade Deficit Widens