Export push takes trade balance over $650m

By BRIAN FALLOW economics editor

Surging exports pushed the trade balance to a record monthly surplus of $652 million in May.

That is twice what the financial markets were expecting and twice the average May surplus over the past 10 years.

Deutsche Bank economist Darren Gibbs said that, following Wednesday's robust consumer confidence and building consents figures, the trade data provided further evidence that the economy was weathering the global downturn in good shape.

It reduced the already very small chance that the Reserve Bank would cut interest rates again next week, he said.

Although the export figure of $3.22 billion, 26 per cent up on May last year, is an estimate and no breakdown is available, the April estimate from Statistics New Zealand was only $26 million, or 0.8 per cent, out.

Bank of New Zealand economist Stephen Toplis said that while buoyant prices accounted for much of the annual increase in exports, the fact that it was accelerating suggested volumes might be improving as well.

HSBC economist Grant Fitzner said the usual seasonal pattern would see the recent run of strong trade surpluses erode and probably dip back into deficit in the second half of the year.

"But on a seasonally adjusted basis recent trade numbers have been very strong. The merchandise goods surplus for the first two months of the June quarter totals $1.03 billion compared with just $151 million for the same period last year.

"Even if June's monthly trade balance was flat, that would still imply a strong positive contribution by net exports to GDP growth and a further fall in the current account deficit in the June quarter," Mr Fitzner said.

In the three months ended May 31, exports were 20 per cent up on the same period last year, while imports were up 8 per cent, or 11 per cent if allowance is made for "lumpy" imports of transport equipment in the year-ago period.

But allowing for higher import prices, that suggests core import volumes remain very subdued, Mr Gibbs said.

Imports of capital plant and machinery were up 7.6 per cent on the same period last year, and imports of consumer goods were up 13.9 per cent.

Imports of military gear increased 10-fold, but were still only $48 million for the quarter.