NZ trade surplus may be near peak

New Zealand recorded its sixth consecutive monthly trade surplus in June, and the first surplus for a June month since 2002, but that may be about as good as the trade balance gets.

Statistics New Zealand (SNZ) today said exports last month were 17 percent up from a year earlier, while imports eased 1.6 percent.

The June month trade surplus was $276 million, or 7.3 percent of exports, while for the year to June there was a surplus of $639m.

BNZ senior economist Craig Ebert said the figures were good enough, in detail, to suggest decent GDP growth through the June quarter.

"But they also suggested the trade surplus is close to peaking, which fits with our belief the current account is about to turn the wrong way, if it hasn't already," Mr Ebert said.

That was a reminder the economy still had major rebalancing issues on the horizon, which would have to involve much improved savings behaviour.

Dairy and meat export volumes inched up in the June quarter and were surprisingly strong given clear pointers that dairy and meat production fell, indicating a larger dip into inventories than expected.

A 6 percent rise in the seasonally adjusted value of mechanical exports in the June quarter and a 4 percent rise in electrical exports fit with the understanding of a continuing strong rebound in the manufacturing sector, Mr Ebert said.

Evidence that import volume growth was mainly coming from industrial supplies strengthened the view manufacturing was doing well.

Relative softness in capital goods import statistics did suggest caution on business investment for the June quarter.

ASB economist Jane Turner said the ongoing trade surpluses and surprising strength in export receipts showed an export-led recovery under way.

While stronger dairy prices had been a key driver for the June quarter strength, it was encouraging to see strength in seasonally adjusted exports was relatively broad based with dairy, meat, forestry and manufacturing all performing well during the quarter.

Economic growth over 2010 would be supported by the recovery in export incomes, with the Reserve Bank today pointing to strong prospects for forestry and manufacturing in particular, she said.

SNZ said exports rose $552m in the June month to $3.8b, with the largest increase in the milk powder, butter and cheese category which was up $244m or 44 percent from a year earlier.

Imports in June were $56m lower than a year earlier at $3.5b, but would have been $515m or 17 percent higher had it not been for the import of aircraft valued at $571m in June 2009.

The value of exports for the year to June was down $2.4b or 5.5 percent from a year earlier to $40.7b, while imports fell $6.1b or 13 percent to $40b.

NZPA WGT mjd gt