Surprise $293m surplus tonic for economy

By BRIAN FALLOW economics editor

Trade accounts took a turn for the better last month, with a surplus of $293 million - well above market expectations and the best June figure for nine years.

The apparent strength in exports was surprising, said Bank of New Zealand economists.

"Compared with year-earlier levels, export receipts fell 6.4 per cent but over the same period the currency was up 13.1 per cent on a trade-weighted basis, and world prices of the commodities we export slumped 11.5 per cent."

It would have been fair to assume a decimation of export receipts.

"We can only assume the main reason this is not happening is that exporters have been, so far, protected by fixed-price contracts and currency hedges. Clearly these are factors that will roll off in due course, so export receipts will still face substantial downward pressure as the year wears on."

Imports last month were 12.2 per cent down on a year ago, but for the June quarter imports were marginally (0.3 per cent) higher than for the same period last year.

Adjusted for exchange rate movement, BNZ said, imports of consumer goods were 15.2 per cent higher than for last year's June quarter.

HSBC economist Grant Fitzner said Statistics New Zealand's trend trade balance, which includes a seasonal adjustment, showed an encouraging pattern. The trend surplus rose from $55 million in May to $66 million last month.

"These are smaller surpluses than were posed last year but given the still tentative nature of the global economic recovery, soft commodity prices and sharp lift in the New Zealand dollar though June it is a remarkably good outcome," Fitzner said.

"While in time the stronger currency may boost import demand and hurt exports, we are yet to see that. In the meantime the current dip in the kiwi should help delay those currency effects."

Deutsche Bank's Darren Gibbs said the data implied that both export and import volumes grew strongly in the quarter, especially exports, in part because of the running down of stocks in the commodity sector.

An estimated $2.63 billion worth of exports left the country last month, just below forecasts of $2.67 billion. Imports were $2.34 billion, compared with the expected $2.6 billion.