New Zealand's Annual Trade Deficit Narrows

New Zealand's annual trade deficit narrowed for the first time in four months in June as a contracting economy curbed demand imports, while exports rose more than forecast.

The gap narrowed to NZ$4.48 billion ($3.3 billion) in the 12 months ended June 30 from NZ$4.78 billion in the year through May, Statistics New Zealand said in Wellington today. The median estimate in a Bloomberg survey of nine analysts was for a NZ$4.64 billion shortfall.

New Zealand's economy contracted in the first quarter and eight of 13 economists surveyed expect it also shrank in the three months ended June 30, putting the nation in its first recession since 1998. Consumer confidence fell to a record low last month, curbing demand for imported cars and furniture.

New Zealand's currency bought 74.22 U.S. cents at 11:45 a.m. in Wellington from 74.31 cents immediately before the report.

A record 49 percent of 1,119 people surveyed in the two weeks ended June 29 said it was a bad time to buy a major household item, according to research group Roy Morgan.

Economists monitor the rolling, 12-month trade balance because of volatility in the month-on-month figures, which aren't seasonally adjusted. In June, there was a NZ$223 million trade deficit compared with an NZ$518 million gap a year earlier. Economists expected a NZ$350 million deficit.

Imports rose 17 percent to NZ$3.81 billion in June from a year earlier, matching the May increase. The increase exceeded economists expectations after including a large aircraft valued about NZ$60 million.

Fuel imports rose 73 percent after prices almost doubled from a year earlier, the statistics agency said. Machinery and fertilizer imports also rose.

Imports of cars fell 12 percent while there was less demand for sports equipment, furniture and textiles, the agency said.

Reserve Bank of New Zealand Governor Alan Bollard last week cut the benchmark interest rate by a quarter point to 8 percent after keeping borrowing costs at a record-high for a year. High credit costs and soaring fuel prices have helped stall the economy.

Bollard is looking for exports, which make up 30 percent of the $104 billion economy, to buoy growth next year.

Exports rose 31 percent in June from a year earlier to NZ$3.59 billion. The increase was the largest in seven years. Economists forecast a 22 percent gain.

The statistics agency doesn't exclude inflation from the trade report, so values are affected by rising prices. In June, commodity prices rose 12 percent from a year earlier, according to an ANZ National index.

Sales of milk powder, butter and cheese, which make up almost one-fifth of overseas shipments, increased 58 percent in June from a year earlier.

New Zealand, Bloomberg
7/28/2008 6:54:23 AM