NZ Exports On The Rise

NZ Exports On The Rise

·        Trade balance in surplus for second straight month
·        Exports and imports surprisingly strong
·        Annual trade balance was -NZ$4.8bn, compared to -NZ$5.2bn in February

Owing to a solid increase in exports, New Zealand’s trade balance remained in surplus for the second straight month in March. The surplus narrowed to NZ$324 million (J.P.Morgan NZ$100 million, consensus NZ$250 million) from NZ$487 million in February, which had been the first surplus in a year.

The 17.7%oya rise in exports was the largest gain in seven months, with the monthly value of total exports venturing over NZ$4 billion for the first time on record. The rise was led by strong shipments of aircraft and meat and edible offal. Without the NZ$128 million jump in the value of aircraft exported, the trade balance would have fallen much in line with expectations. By country of destination, the largest increases in exports from the previous year were in exports to India (+134%), China (+119%), Hong Kong (+72%), and Australia (+33%). According to Statistics New Zealand (SNZ), the surge in exports to China owed much to an increase in shipments of whole milk powder, logs, and milk-based nutritional powder.

Imports were also stronger than expected, rising for the first month in three. Imports increased 6.9%oya to the highest value ever recorded in the month of March - a rise, in part, attributed to the firmer Kiwi dollar (up 2.9%m/m in March in trade-weighted terms). From a year ago, of New Zealand’s top five import partners, Singapore recorded the largest increase (+127%) on the back of an increase in petroleum and products imported, according to SNZ.

Attention now turns to the NBNZ business confidence survey due later today and the RBNZ OCR announcement tomorrow morning. We suspect a mild deterioration in confidence in April and the RBNZ to cut the OCR 50bp on Thursday. Even though we believe that economic conditions warrant a larger move, RBNZ Governor Bollard has made clear that any future rates cuts will be smaller than those recently delivered. That said, we believe the statement accompanying the decision will be decisively dovish, and reiterate that rates in New Zealand are going to remain low for an extended period.

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