NZ's trade balance worse again

New Zealand's trade balance was again worse than expected in May.

Instead of the $300 million surplus predicted by economists, a $25 million deficit was posted, Statistics New Zealand figures out today showed.

That took the deficit in the year to May to over $5 billion against economists' forecasts of $4.69 billion.

The annual trade deficit equates to 16.3 per cent of exports. As a percentage of exports, this is the largest annual deficit since the mid-1970s, Government Statistician Brian Pink said.

The value of merchandise exports for May -- $2.973 billion -- was 12 per cent lower than for May 2004, while the value of imports -- $2.998 billion -- was 11 per cent higher.

SNZ said it was the first May deficit in a decade. In the last nine years, there has been an average surplus of $361 million in the month of May.

The main reason for the fall in exports over May 2004 was the drop in exports of milk powder, butter and cheese; aircraft; meat; and fruit, which all had high values a year earlier, SNZ said.

The higher cost of crude oil was the main contributor to the increase in the value of imports. Crude oil is imported in large shipments at irregular intervals and can cause fluctuations in the value of imports from month to month.

In the year to May, the value of exports was up 4.6 per cent at $30.796 billion. But that did not match the 9.2 per cent rise in the value of imports to $35.801 billion.

ANZ-National economist Cameron Bagrie called the deficit "another shocker" to add to last week's ugly current account figure.

"If you step back, the two surprises in the data were oil... inflating the import bill, and to the same degree exports are looking a little bit weaker than expectations," Mr Bagrie told Reuters.

"Some of that looks to be timing in terms of pastoral exports, but also a mild currency-related trend looks to be weighing on exports and competitors.

"Today's release reinforces the structural challenges and headwinds that are facing the NZ dollar."

"It's quite a bit worse than the market had been expecting," said ASB economist Kate Skinner.

"One of the reasons for the deteriorating current account deficit has been a deterioration on the goods balance and this would point to a further weakness.

"Also net exports were a very negative contributor to the GDP growth that we saw in the March quarter and these data sort of suggest that there may not be a strong bounce back as people may have originally expected."

- NZPA