Trade deficit of $2.5b at lowest level in six years

The gap between imports and exports narrowed last month, bringing the annual trade deficit to $2.5 billion, its lowest level in six years.

The monthly deficit was $163 million, as the country pulled in $1.05 of imports for every $1 of exports. It is an improvement from an average July deficit equivalent to 24 per cent of exports over the previous five years. Compared with July last year, imports were 21 per cent lower, while exports were 7 per cent lower.

Though the dollar has been rising over the past six months, it was still 10 per cent lower on a trade-weighted basis last month than in July last year.

Oil made a big difference on both sides of the trade accounts. Nearly half of the decline in exports from July last year arose from a 38 per cent fall in value of oil exported from the Tui field. The decline was almost entirely because of lower oil prices, quantities were similar to a year ago, Statistics New Zealand said.

As in June, meat exports were lower than a year ago, reflecting a sharp drop in the lamb kill.

Dairy export receipts were only 2 per cent higher than a year ago, despite a 54 per cent rise in the volumes shipped.

Compared with a year ago, imports of capital goods were down 19 per cent, cars down 43 per cent and consumer goods down 8 per cent.

Economists saw the improving trade accounts as pointing to a shrinking of the current account deficit.

"We already have 6.8 per cent of GDP pencilled in for the year to June 2009. Today's July trade data set the scene for something below 6 per cent for September," said BNZ economist Craig Ebert.