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28/2/2018 — General
Reversal from surplus to deficit
By Dene Mackenzie

New Zealand's unusually large trade surplus in December was followed by an unusually large deficit in January.

Otago Chamber of Commerce chief executive Dougal McGowan said the largest January deficit since 2007 would be something the chamber would monitor.

He suspected the region was not as badly affected as others in the country.

The fall in exports for the month was not surprising, though larger than economists had assumed. Imports have remained surprisingly strong in recent months.

The chamber, which covers export documentation for most of the Otago-Southland region, had noted exports had remained strong in January, despite a fall in milk production.

Beef exports and prices were firm, log prices and volumes were up, and milk volumes, though affected by mycoplasma bovis, were receiving improved prices, McGowan said.

The Port of Bluff had experienced its best quarter in a long period because of increases imports of stock feed.

It was too early for alarm, he said. Export documentation would provide a good monitor of the situation, something the chamber would watch closely for any changing trends.

In seasonally adjusted terms, exports fell by 14.7% in January, more than reversing their 14% rise in December. Export volumes were down across all of the major categories.

Goods exports jumped 9.5% to $4.31 billion compared with January last year, while imports surged 17% to $4.88 B, resulting in a trade deficit of $566 million. This was wider than the $227 M deficit in January last year and the largest for the month since 2007, Statistics New Zealand said.

The latest data was a big swing from December when the country recorded a trade surplus of $596 M, the largest ever for a December month.

Economists had been expecting exports and imports to cancel each other out in January for a net trade balance of zero.

ASB senior rural economist Nathan Penny said dairy values were weak, dipping nearly 12% in January. Fruit exports posted a drop of 31% in value for the month.

However, both those large falls appeared due to the normal monthly volatility in the trade data.

“As a result, we expect the export weakness to prove temporary.”

Westpac economist Michel Gordon said the export figures supported his suspicion the jump in December was related to the timing of shipments.

“We expect export growth to remain subdued in the near term, as poor weather has hampered dairy production, our largest export category.

Imports were little changed in seasonally adjusted terms, against our assumption of a pullback from their recent highs. Notably, the surge in imports of plant and machinery that began late last year has continued this year.

Capital imports increase the trade deficit in the near term, but they add to the economy's productive capacity in the longer term.

The New Zealand dollar fell by about 15 points to US73 cents after the release.

The monthly trade figures are not typically a big market mover, but the surprise was unusually large this time.

*Dene Mackenzie is business editor of the Otago Daily Times.

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