Surprise surplus puts icing on trade cake

By BRIAN FALLOW

Exports exceeded imports by just under $1 billion last year, a dramatic turnaround from the $1.5 billion deficit for 2000.

But economists believe that the best of the trade cycle is behind us.

Statistics New Zealand's early estimate for last month is a surplus of $26 million - the first surplus in a December month for five years and well above market expectations of a deficit of $110 million.

Exports at $2.59 billion are 1.8 per cent lower than in December 2000 but imports fell even more, by 5.3 per cent to $2.54 billion.

The decline in imports mainly reflected a halving of oil imports and a 10 per cent drop in other intermediate goods - raw materials and components.

But consumer goods imports were also down, by 4 per cent from a year ago.

Imports of plant and Machinery were 12 per cent higher, and cars 9 per cent higher.

Deutsche Bank chief economist Ulf Schoefisch said the information suggested that the current account deficit had fallen further, to below 3 per cent of GDP.

But Mr Schoefisch expected the deficit to gradually widen to 3.8 per cent this year as the terms of trade (the quantity of imports that a fixed basket of exports would pay for) deteriorated.

UBS Warburg chief economist Robin Clements said it was likely that the best of the trade data was behind us because of a combination of falling commodity prices, soft demand overseas and a revival of domestic demand.