Reduced import demand shrinks NZ's trade deficit

New Zealand posted its smallest annual trade deficit in more than seven years in 2009 as imports fell for a ninth month in December, outpacing a decline in exports.

The shortfall narrowed to $517 million in the 12 months ended December 31 from $860 million in the year through November, Statistics New Zealand said yesterday.

The gap was the least since September 2002.

The trade deficit has shrunk to less than an eighth of its size in 2008 as the nation's worst recession in three decades reduced demand for imported machinery, computers and consumer goods. Reserve Bank Governor Alan Bollard said business investment remained weak and households were still cautious about spending.

"It has been the capitulation in imports since the onset of the recession that has led to the sharp turnaround in the trade balance," said Khoon Goh, senior economist at ANZ National Bank in Wellington.

"At the rate it is going, we may end up with an annual trade surplus."

Economists monitor a rolling, 12-month trade balance for New Zealand because of volatility in the month-on-month figures, which are not seasonally adjusted. In December, there was a trade surplus of $2 million, compared with a $341 million deficit a year earlier.

Imports fell 19 per cent in December from a year earlier to $3.4 billion, the statistics agency said. It was the smallest annual decline since June.

Economists expect demand for imports will rise in 2010 as the economy recovers.

- BLOOMBERG