Trade balance falls as exports slide

By BRIAN FALLOW

The trade balance plunged deeper into the red last month as imports remained buoyant and export receipts continued a decline now five quarters long.

Imports exceeded exports by $230 million, equivalent to 10.2 per cent of exports.

Normally there is a trade surplus in June; it has averaged 6.3 per cent of exports over the past 10 years.

The effect was to push the annual deficit out to $2.88 billion, from $2.33 billion in the year ended May.

Analysts had expected to see the trade flows roughly in balance. The surprise lay in weaker-than-expected exports. A breakdown of the export data will not be available until August 6.

Exports last month at $2.26 billion were 13.6 per cent down on June last year, while imports at $2.49 billion were 8.4 per cent higher.

For the June quarter exports were 11.7 per cent down on the same period last year, almost matching the 11.9 per cent increase in the trade-weighted exchange rate between the two periods.

But the dollar value of imports in the latest June quarter was almost unchanged from a year earlier, implying strong volume growth.

Bank of New Zealand economist Stephen Toplis said that on a currency-adjusted basis consumer goods imports were 12 per cent up on the June quarter last year, industrial supplies 6 per cent higher and capital goods 9.6 per cent higher.

It was heartening that growth in imports of capital goods was accelerating, he said.

"Hopefully it indicates businesses are increasing investment on the basis of a positive future outlook."

But it now looked as though the current account deficit would widen from 3.9 per cent in the year ended March to 4.6 per cent for the year ended June.

The pace of the deterioration would begin to weigh on the New Zealand dollar, eventually putting a stop to its appreciation, Toplis said.