Trade surplus narrows more than expected in April on lower meat and dairy volumes

Michael Gordon, senior economist at Westpac

New Zealand's trade surplus narrowed more than expected in April as exports fell more than imports, driven by a drop in shipments of  dairy products and meat. The trade surplus was $534 million in April, from a revised $935 million in March, and $171 million a year earlier, according to Statistics New Zealand.

The annual trade balance turned to surplus of $1.19 billion, or about 2.3 percent of exports, from a deficit of $687 million a year earlier. Economists polled by Reuters predicted a monthly surplus of $667 million and an annual surplus of $1.3 billion. (See graph below)

Exports fell 11 percent to $4.5 million in April, for an annual increase of 9.5 to $50.6 billion. Imports declined 4 percent to $3.96 million in the month, with an annual increase of 5.3 percent to $49.4 billion.
Milk powder, butter and cheese exports rose 36 percent to $1.22 billion in April from the same month last year, for an annual increase of 33 percent to $15.2 billion. Meat and edible offal rose 5.2 percent in the month to $585 million for an annual gain of 3.5 percent to $5.5 billion.

The trend for the dairy exports showed a seasonally adjusted 1.8 percent fall this month and is now 5.4 percent lower than December's peak, while meat and edible offal exports fell 5.9 percent, Statistics NZ said. Both export groups reported lower volume in the month - milk powder, butter and cheese volumes fell 5.3 percent to a seasonally adjusted 216 tonnes and meat and edible offal fell 8 percent to 73 tonnes.

"Exports have begun their normal seasonal decline," Michael Gordon, a Westpac Banking Corp senior economist, wrote in a note. "The fall this month was driven by quantities rather than prices, with dairy products down 5 percent and meat down 8 percent by volume.

While dairy prices in the GlobalDairyTrade auction system have fallen sharply since March, these prices related to delivery at future dates, so the impact should start to show up in the trade figures in the next few months.

Exports of logs, wood and wood articles gained 31 percent to $363 million in the month, from April 2013, for an annual lift of 26 percent to $4.13 billion.

Exports to China, the biggest market for New Zealand, jumped 38 percent to $895 million in April for an annual gain of 52 percent to $11.43 billion, or 23 percent of all exports. Imports from China lifted 7.4 percent to $631 million in the month, to an annual increase of 8.5 percent to $8.4 billion.

Exports for Australia rose 8 percent to $786 million, for an annual decline of 6.5 percent to $9.09 billion. US exports rose 16 percent to $371 million in the month and fell 3.3 percent to $4.12 billion in the year.


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