28 Jun 2012

Softer export figures boost trade deficit

7:15 am on 28 June 2012

New Zealand's trade deficit is slipping further into the red as exports continue to fall, and economists expect it to continue to widen.

Statistics New Zealand figures show a seasonally-adjusted trade deficit of $318 million in May compared with $240 million in the previous month and $164 million in May last year.

The decline is due to a seasonally-adjusted 1.3% fall in exports, particularly of meat, logs, wood products and dairy .

But it was also affected by an 0.8% increase in imports, led by a jump in capital goods such as machinery, vehicles and parts, and consumer goods like clothing and shoes.

ASB Bank chief economist Nick Tuffley says it is very hard to tell if the pickup in imports is due to goods that will be used in the Canterbury rebuild.

Exports were $3.6 billion in May, down from a peak of $4.1 billion in December last year.

On an annual basis, the trade deficit for the year to end of May was $805 million, or 1.7% of exports. In the year to the end of April the deficit was $541 million.

Statistics New Zealand says exports have fallen in four of the past five months, driven lower by falling prices.

Mr Tuffley says while both imports and exports were slightly stronger than expected in the month, he expects the annual trade deficit to continue to widen.

"The main reason why we have seen - since the start of the year - exports ease back comes through from weaker prices for some of those key commodities," he says. "Also, in some cases, the volumes have softened as well".