New Zealand Annual Trade Deficit Widens

New Zealand's annual trade deficit unexpectedly widened in May as rising oil prices and the purchase of an aircraft fanned imports.

The gap widened to NZ$4.81 billion ($3.6 billion) in the 12 months ended May 31 from NZ$4.61 billion in the year through April, Statistics New Zealand said in Wellington today. The median estimate in a Bloomberg survey of 11 analysts was for a NZ$4.5 billion shortfall.

Reserve Bank Governor Alan Bollard is looking to exports, which make up 30 percent of the $104 billion economy, to buoy growth as he keeps interest rates at a record high to curb domestic demand. World oil prices have surged 40 percent this year, increasing the value of imports, while a drought has crimped production of dairy products shipped offshore.

A second report today showed the economy contracted 0.3 percent in the first quarter, led by a decline in exports as a drought drained rivers and forced many dairy farmers to stop milking their cows.

Farm production and food processing declined, while first- quarter exports excluding inflation fell 1.8 percent, the statistics agency said in the gross domestic product report.

Economists monitor the rolling, 12-month trade balance because of volatility in the month-on-month figures, which aren't seasonally adjusted. In May, there was a NZ$196 million trade deficit compared with an NZ$8 million surplus a year earlier. Economists expected a NZ$150 million surplus.

Imports rose 17 percent to NZ$3.92 billion in May from a year earlier. Economists expected an 11 percent increase.

Crude oil imports surged 25 percent from a year earlier while gasoline and jet fuel purchases more than doubled, the agency said. Crude prices rose 67 percent from May last year, it said.

Aircraft imports increased NZ$81 million after the purchase of a large aircraft, and there was increased demand for diesel cars, the agency said.

The statistics agency doesn't exclude inflation from the trade report, so values are affected by rising prices.

Exports rose 11 percent from a year earlier to NZ$3.73 billion. Economists forecast an 18 percent increase.

Sales of milk powder, butter and cheese, which make up almost one-fifth of overseas shipments, increased 3.9 percent in May from a year earlier. The value of dairy exports rose even as the volume exported fell 30 percent, the agency said.

Exports of crude oil gained to NZ$241 million last month from NZ$99 million a year earlier. Following the commencement of production at the Tui field in July, oil is now New Zealand's third-largest export after dairy and meat.

Exports of meat, fish and fruit also increased. Log and aluminum sales declined, the agency said.

New Zealand Annual Trade Deficit Widens, Bloomberg
6/27/2008 6:48:36 AM