Why the drop in the trade balance is a good thing
Today's figures show an unexpectedly sharp drop in the trade balance – but there are some good reasons for that.
Today’s figures show an unexpectedly sharp drop in the trade balance – but there are some good reasons for that.
The average market forecast was for a monthly surplus of $400 million, down from the May surplus of $605 million.
In fact, the June balance is down to a surplus of $230 million, and the May balance was revised down to a surplus of $551 million.
The drop can be seen as being worse than it is. The value of both exports and imports is rising, and the crude notion - still prevalent in some circles – that exports = good and imports = bad needs to be laid to rest.
Firstly, the rise in imports is not caused by a renewed wave of foolish consumer spending.
Consumption good imports are actually flat – they have only risen 5% over the past year, and have in fact been falling in value since November, when New Zealand imported $1.092 billion of consumption goods. Last month, the figure was $854 million.
The large increases have been in the investment area. Plant and machinery imports rose 14.9% over the past year. Imports of intermediate goods – excepting oil - rose 12.6% for the year.
On a monthly basis, overall, imports overall rose $167 million (4.7%) to $3.7 billion in June, the largest increases coming from petroleum products, up $62 million (9.3%) and mechanical machinery and equipment, up $33 million (7.6%).
In a sign farmers are increasing their investment, the next largest increase was imports of fertiliser, up $330 million - a whopping 143%.
On the other side of the ledger, exports in June rose $176 million (4.7%) to $4 billion.
The main increases were dairy products – up $90 million (11%) and meat products – up $47 million (11%).
Rob Hosking
Tue, 26 Jul 2011
Tue, 26 Jul 2011
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Why the drop in the trade balance is a good thing
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