$15m July surplus as China dairy trade drive exports

BUSINESSDESK: New Zealand recorded a small trade surplus in July, with shipments of dairy products to China making up for weaker exports to Australia, Indonesia and India.

The surplus was $15 million last month, down from a revised $287 million in the previous month, Statistics New Zealand says. Exports slipped to $4.03 billion from $4.18 billion, while imports gained to $3.99 billion from $3.89 billion.

The annual deficit was $853 million, or 1.8% of exports. Economists had forecast a monthly surplus of $33 million and an annual gap of $820 million, according to a Reuters survey.

Total exports to China rose 39% in July from a year earlier, while exports to Australia fell 7.4%, reflecting a drop in crude oil and refrigeration equipment.

In the 12 months ended July31, exports to Australia edged up 0.1% to $10.39 billion, keeping New Zealand's nearest neighbor firmly at the top of the table.

Exports to China rose about 11% to $6.26 billion and shipments to the US grew 4.5% to $4.1 billion. Japan was in fourth place, with a rise of 0.2% to $3.4 billion.

Australia took 22% of New Zealand's total exports of $49.98 billion in the latest year, which was up 1.6% from a year earlier.

China remained the biggest source of imports for New Zealand in the 12 months ended July 31, rising 8% to $7.7 billion, for a trade deficit in China's favour of $1.46 billion.

Australia sent $7.38 billion of merchandise imports, up 0.3%, while shipments from the US fell 6.9% to $4.7 billion.

In terms of New Zealand's main commodity exports, dairy products rose 4.3% to $11.89 billion in the 12 months through July, while meat and edible offal fell 5% to $5.1 billion and logs and wood articles fell 4.3%  to $3.1 billion. Crude oil exports fell 2.9% to $1.98 billion.

"Strong dairy production has underpinned the recent recovery in exports and return to a (seasonally-adjusted) trade balance surplus in recent months," says Jane Turner, economist at ASB.

"How well dairy exports hold up over the coming year will largely depend on weather conditions and pasture growth for the upcoming season.

"In the near term, we expect further flow through from past falls in (spot) dairy prices to weigh on exports. But from 2013, we expect dairy prices will recover."