Data Flash (New Zealand) Merchandise Trade Balance - February 2002
Result: A trade surplus of $269m was recorded in February compared with market expectations of a $185m surplus.
Implication for markets: Although better than expected this month, the trade balance is on a deteriorating trend, taking
some of the gloss off the positive medium-term NZD story. Strong imports confirm the economy's resilience.
Commentary
The February trade balance was better than expected. Imports printed in line with expectations. However, exports were
stronger than expected, probably due to stronger dairy exports (recent data has pointed to a build up of dairy stocks).
With the export sector continuing to be affected by past sluggishness in global demand and weakening prices, and imports
being driven higher by robust domestic demand, today's result further confirms that the trade balance is now on a
deteriorating trend.
While the annual current account deficit declined to 3.2% of GDP in the 2001 calendar year, a deficit of a little over
4.5% of GDP now appears likely for the current calendar year (more in line with the historic average over the last 20
years).
The prospects for renewed improvement in the current account deficit at a later date will depend on the strength of the
global recovery and the path of the NZD. Our central view is that the bulk of the deterioration in the annual deficit
will have occurred by Q3 2002, with the deficit remaining broadly stable over the subsequent 18 months.
Key Points
A provisional merchandise trade deficit of $269m was recorded in February, compared with a surplus of $390m in February
2001. The average deficit for February over the past 10 years is $195m. The annual trade surplus was $512m, compared
with a surplus of $632m in January and a deficit of $1,096m a year earlier.
The result was better than the median market expectation of a $185m surplus. Import values were very close to
expectations but export values were stronger than expected.
The value of exports for the three months to February was 1.0% lower than a year earlier, with falling prices more than
offsetting modest growth in volumes.
The estimated level of imports for the three months to February was 4.2% higher than a year earlier. Strengthening
import volumes has been partially offset by lower prices, especially for oil.
The strength of the consumer sector was evident in February import values. The value of imported consumption goods was
13.9% higher than a year earlier. Motor vehicle imports remained at elevated levels, partly reflecting the strength in
underlying demand, but also reflecting a build up of stocks as motor vehicle dealers seek to prepare for the forthcoming
safety-based restrictions on imports of older used vehicles.
While consumer imports are strengthening, imports of capital goods look to be showing some signs of (probably) temporary
weakness. After making a probable strong contribution to Q4 GDP (data due out tomorrow), imports data suggests that a
negative contribution is on the cards for Q1.
Ends