2nd-quarter current account gap narrower than expected

New Zealand reported a narrower-than-expected current account deficit in the second quarter as the services balance slid, while the annual deficit continued to widen.

The deficit was $618 million in the three months to June 30 versus a revised first-quarter surplus of $221 million, Statistics New Zealand said. The annual deficit was $7.5 billion, or 2.8 percent of gross domestic product for the year ended June versus a deficit of $6.8 billion, or 2.7 percent of GDP, in the prior year.

Economists had expected a deficit of $900 million in the second quarter and an annual deficit of 3.1 percent of GDP, according to a Bloomberg poll.

The biggest quarterly movement was in the services balance, which showed a narrower surplus of $778 million in the second quarter versus a revised surplus of $2.7 billion in the first quarter. The services balance slid on the back of a decline in services exports while services imports moved slightly higher.

The goods balance recorded a surplus of $1 billion in the three months to June 30 versus a revised surplus of $161 million in the prior quarter. Exports were $14.3 billion while imports were $13.3 billion. In the first quarter exports were a revised $12.6 billion and imports were a revised $12.5 billion.

The financial account balance showed a surplus of $110 million in the three months to June 30 versus a revised deficit of $787 million in the prior quarter.

The balance on the capital account was a $14 million deficit in the June quarter versus a revised $4 million surplus in the prior quarter.

New Zealand's net international liability position was $154.2 billion or 57.5 percent of GDP as at June 30, from a revised $153 billion or 57.8 percent of GDP at March 31. The $1.2 billion increase was driven by a $2.8 billion change in net market price movements, Stats NZ said. Foreign investors saw the value of their shares in the NZX-listed companies increase along with the value of government bonds.

The value of New Zealand's international assets was $249.8 billion as at June 30, driven by increases in reserve assets, portfolio investments and financial derivatives. Equity investments reached a record high of $104.9 billion as at June 30, up $2.6 billion compared to the prior quarter.

Foreign investment in New Zealand reached $404 billion as of June 30 versus $398 billion as of March 31. Equity investment by foreigners reached a record high of $113.2 billion, up $3.2 billion from March 31.

The net external debt position - excluding financial derivatives and equity - was $145.5 billion or 54.3 percent of GDP at June 30 versus a revised $144.4 billion or 54.6 percent of GDP on March 31.

(BusinessDesk)