Trade deficit soars to record

The annual trade deficit widened to a record last month as imports soared by almost a fifth after consumers and companies bought more cars and machinery.

Statistics New Zealand said the merchandise trade deficit was $4.19 billion in the year to November 30 compared with $3.9 billion in October.

The result was somewhat higher than economists surveyed by Bloomberg had expected - they thought the deficit would come in at $4.02 billion.

The economy expanded 4.4 per cent in the year to September, buoyed by consumer spending and business investment in factories and equipment.

"The economy is growing on the back of a fairly robust level of activity and a high dollar means we're sucking in imports at an unsustainably high rate," said Ulf Schoefisch, chief economist at Deutsche Bank.

He predicted that the deficit would widen. "That's driving the current account and trade deficit out further and further."

The country posted a record current account deficit of $8.25 billion in the year to September 30. The current account deficit is the broadest measure of international trade because it incorporates trade, services, tourism spending and financial transactions.

Consumer confidence reached a 10-year high in the fourth quarter, a Westpac and McDermott Miller index found.

The proportion of consumers saying it was a good time to buy a car, household appliance or some other big-ticket item rose.

New car sales in the 11 months to November 30 exceeded 91,000 and could reach 100,000 for the full year, the highest since 1990, said Paul Carroll, general manager of new vehicles at Toyota New Zealand.

"There's no sign of it slowing," he said. "People are out there buying. We know the first six months of 2005 are going to be pretty strong."

Toyota is forecasting the industry will sell 98,000 new cars next year.

Carroll said a 6.2 per cent increased payment to dairy farmers announced by Fonterra this month "should push along sales to rural customers".

Imports gained 19 per cent from a year earlier to a record $3.3 billion, said Statistics New Zealand.

Demand for machinery, fuel and consumer goods increased. Passenger car imports rose 22 per cent and machinery imports surged 25 per cent.

The average price paid for crude oil last month soared 59 per cent from a year earlier.

Imports gained 9.6 per cent to $34.7 billion in the year to November 30, led by a surge in fuel and electrical machinery purchases. Exports rose 7 per cent.

In November, exports increased 9.6 per cent from a year earlier to $2.62 billion. The exports figure is provisional and will be updated on January 14.

- BLOOMBERG