Trade deficit shrinks to six-year low on weak imports

Imports fell by $1.2 billion in September. Photo / Kenny Rodger.

New Zealand's annual trade deficit shank to a six-year low last month, on weaker-than-expected imports, suggesting companies aren't rushing to re-stock in anticipation of economic recovery.

The deficit narrowed to $1.53 billion in the 12 months ended Sept. 30, the most slender gap since early 2003, according to Statistics New Zealand. That's smaller than the $1.77 billion deficit forecast in a Reuters survey. In the month of September, imports fell to $3.25 billion from $3.47 billion, while exports rose to $2.83 billion from $2.74 billion.

"Through to September there was very little evidence that firms are gearing up for any sort of recovery - but you wouldn't expect anything else with the economy growing only marginally in the third quarter," said Darren Gibbs, chief economist at Deutsche Bank.

Gibbs is forecasting gross domestic product rose 0.4 per cent in the third quarter after emerging from recession with 0.1 per cent growth in the previous three months.

The high New Zealand dollar is sapping the ability of exports to contribute to growth. Reserve Bank Governor Alan Bollard today said the resilient kiwi "has limited the scope for exports to contribute to the recovery and reinforces a bias towards domestic expenditure."

The New Zealand dollar recently traded at 72.14 US cents from 72.07 cents immediately before the trade data. The kiwi tumbled from 72.74 cents after Bollard released his review of interest rates, extending an overnight slide as weak US data eroded investors' risk appetite.

Imports in September tumbled 27 per cent by value from the same month of 2008, reflecting weaker prices for crude oil. Exports fell 10.9 per cent, paced by milk powder, butter and cheese.

-BUSINESSWIRE