KEY POINTS:
Fall in volume adds to woes after poor retail sales and construction figuresby Tracy Withers
New Zealand's exports fell for a third straight quarter as dairy shipments slumped to a four-year low, adding to signs the recession will be prolonged.
Export volumes decreased 2.3 per cent last quarter from the previous three months, Statistics New Zealand said. Overseas shipments make up 30 per cent of the economy.
Imports fell 5 per cent amid a slowdown in consumer spending.
The drop in exports follows reports showing a decline in retail sales and construction, suggesting New Zealand's economic slump has deepened. The nation's recession, which began in the first three months of 2008, has prompted Reserve Bank governor Alan Bollard to cut the benchmark interest rate by 3.25 percentage points since July.
"All is not well in the economy," said Stephen Toplis, head of research at BNZ in Wellington.
"Weakness in imports is a reflection of softness in domestic demand."
The Government publishes its third-quarter report on gross domestic product on December 23. Bollard last week forecast the economy would have contracted 0.3 per cent.
Net exports probably added to growth in the third quarter but not as much as previously expected, Toplis said. BNZ forecasts the economy shrank 0.5 per cent in the quarter.
"There is a downside risk for third-quarter GDP and maybe for fourth-quarter as well," he said.
Economists will complete GDP estimates after a December 15 report on manufacturing. Retail spending fell 0.9 per cent in the third quarter and construction declined 2.1 per cent.
Dairy exports, which make up one-fifth of total overseas shipments, slid 4.3 per cent last quarter to the lowest since 2004, the report showed. Sales of milk powder fell 37 per cent.
The decline may have reflected the ongoing effects of a summer drought, said Shamubeel Eaqub, an economist at Goldman Sachs JBWere in Auckland.
Milk production was crimped because dry summer weather was extended until March.
Import volumes fell from a record high in the second quarter as purchases of consumption goods dropped 2.7 per cent.
Import prices surged 11.1 per cent, the most in 24 years, because of fuel costs. Export prices rose by 8.6 per cent.
The terms of trade index, which measures the amount of imports New Zealand can buy from a fixed quantity of exports, fell 2.3 per cent from the second quarter.
"A large chunk of national income growth has been through the terms of trade," said BNZ's Toplis. "That's about to see a sharp reversal and that puts a dent in our future growth prospects."
- BLOOMBERG
