Trade gap growth rate starts to contract

The trade gap went from bad to worse last month, but the rate at which it is getting worse is getting better.

Statistics New Zealand reported imports exceeded exports in February by 9.9 per cent or $257 million. It was the smallest monthly deficit since May last year, but enough to push the annual deficit to $7.22 billion from $7.07 billion in the year to January.

But the annual trade balance has deteriorated by an average of more than $250 million a month over the past year, so February's $150 million represents some flattening out in the rate of descent.

The deficit was widened last month by $200 million worth of aircraft imports offset, somewhat unusually, by $100 million of aircraft exports to Brunei.

Statistics NZ's trend measure, which filters out such lumpy items and adjusts for normal seasonal variations, shows imports relatively flat over the past six months, compared with the steep rise during the previous two years.

Last month, exports were 1.8 per cent down on February last year mainly because of an 18.5 per cent drop in meat exports.

Imports were 3.8 per cent up on a year ago as businesses retrenched and consumers cut back on big-ticket items like cars.

Imports of plant and machinery were down 2.9 per cent on a year ago and imports of materials and components were 7.4 per cent lower.

Consumer goods imports were up 2.7 per cent, excluding cars which were down 9.1 per cent.

Bank of New Zealand economist Dean Ford said the figures suggested the trade deficit could be nearing its peak, especially when put alongside a free-falling dollar and broader signs that consumer spending was coming off the boil.