New Zealand's trade balance went into the black for December – Statistics New Zealand this morning reported a small surplus of $2 million.That is better than the average prediction by market economists of a deficit of $100 million for the month.The
New Zealand’s trade balance went into the black for December – Statistics New Zealand this morning reported a small surplus of $2 million.
That is better than the average prediction by market economists of a deficit of $100 million for the month.
The annual figure is still a deficit, though, of $517 million.
In context though this is historically low – one tenth of the annual deficit of previous years, which recorded deficits respectively of $5.3 billion and $5.6 billion.
So it’s all good?
Not really.
The overall trade figure hides a decline in both exports and imports.
The value of exports for the 2009 calendar year fell $3.2 billion. The value of imports also fell by the same amount. Exports have fallen that far before, but this is the largest fall in imports for a calendar year since the Statistics New Zealand began this series in 1960.
Different factors are driving the dramatic decreases. Some factors are not necessarily negative – one of the largest reasons for the fall in imports is the drop in crude oil prices, which contributed a drop of $2.8 billion in import values. That is a reduction in costs to New Zealand businesses.
With New Zealand now exporting more crude oil, however, that was also a factor in the lower, export returns – although it was the second largest factor, with a $1 billion drop.
The largest factor of course was the drop in dairy prices, which led to a fall of $1.2 billion in export values.
It is important to keep in mind this is not an “exports=good; imports=bad” equation. Most plant and machinery and other inputs to New Zealand businesses are imported and a drop in this area has a long-term impact on the productivity of New Zealand businesses and the economy as a whole.
And imports of mechanical machinery, and vehicles parts and accessories, also slumped during the year. The vehicles group fell $1.8 billion; the mechanical machinery fell $1.2 billion.
These figures are values only: they do not include the volumes, which are released later next month.
It is likely some firms are taking advantage of the high exchange rate to import more machinery and other inputs at a cheaper price.
