Trade deficit widens as dollar hits exports

By BRIAN FALLOW

The trade deficit widened last month as demand for imports remained robust while exports wilted under a higher exchange rate.

Imports at $2.67 billion were 4.8 per cent higher than in December 2001, but Statistics New Zealand's estimate of the month's exports is $2.37 billion, down 7.4 per cent on a year earlier.

The exchange rate appreciated 13.9 per cent last year on a trade-weighted basis.

The monthly deficit of $300 million pushes the trade gap for the whole of last year to $1.3 billion, compared with an annual deficit of $1 billion in November and a surplus of just under $1 billion in calendar 2001.

Statistics New Zealand said its trend series, which strips out seasonal variations and lumpy items worth $100 million or more such as ships or aircraft, indicated little change in imports over the past four months, while exports have been declining, resulting in a widening deficit.

In the December quarter imports of plant and Machinery continued the rising trend of the previous three quarters.

"This is encouraging amid the renewed sense of global uncertainty and generally modest levels of confidence," said Bank of New Zealand economist Craig Ebert.

"Positive trends in corporate capex are likely to reflect the low levels of spare capacity that threaten to strangle the economy at present. Firms have little choice but to expand capacity."

Overall imports in the December quarter were 2.2 per cent higher than in the same period of 2001.

Deutsche Bank chief economist Ulf Schoefisch said that allowing for price movements, driven largely by an appreciating dollar, import volumes had probably grown around 9 per cent over the year and 2 per cent over the quarter.

Both figures far exceeded the rates of economic growth over those periods, he said, which implied rising levels of import penetration.