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New Zealand Trade Surplus Widens to Record on Dairy Exports

New Zealand’s trade surplus widened in April to more than twice economists’ forecasts as surging commodity prices and Asian demand boosted dairy exports, strengthening the local currency to a record.

Exports exceeded imports by NZ$1.11 billion ($910 million), the biggest ever, from a revised NZ$578 million surplus in March, Statistics New Zealand said today in Wellington. The median estimate in a Bloomberg News survey of 13 economists was for a NZ$600 million surplus. Sales to China were up 40 percent from a year earlier.

Rising shipments abroad, which make up 30 percent of gross domestic product, may help New Zealand’s economy recover this year from an earthquake in Christchurch that likely subtracted from first-quarter growth. Finance Minister Bill English last week said the South Pacific island nation is “hooked to the China-Australia train,” which is bolstering commodity prices and export returns.

“The strength in the data, particularly in commodities, highlights the export-led nature of the economic recovery,” said Jane Turner, an economist at ASB Bank Ltd. in Auckland. The key issue “is when increased rural incomes and confidence translate to increased spending and investment,” she said.

The New Zealand dollar gained after the report, trading at 82.19 U.S. cents, the highest level since it was freely floated in 1985, from 81.71 before the data were released. It bought 81.97 cents at 1:05 p.m. in Wellington.

Interest Rates

Central bank Governor Alan Bollard, after an April 28 policy meeting, cited rising commodity prices and favorable climate conditions as reasons for an increase in on-farm investment that may stoke growth. Still, the currency’s strength was “unwelcome” and was slowing the economic recovery, he said.

Bollard kept the official cash rate at a record-low 2.5 percent at that meeting. Twelve of 17 economists surveyed last month by Bloomberg News predict he will keep the benchmark unchanged until next year. Five expect an increase in the fourth quarter.

Low interest rates and rising farm incomes are bolstering confidence as Prime Minister John Key faces a general election on Nov. 26. The number of consumers expecting the economy to improve over the next year rose to 48 percent this month from 38 percent in April, Television New Zealand reported yesterday, citing a Colmar poll of 1,018 people. Key’s National Party had 52 percent support to 34 percent for the main opposition Labour Party, the same poll showed.

Export Boost

Exports rose 17 percent from the year-earlier month to a record NZ$4.65 billion, exceeding economists’ forecast of NZ$4.3 billion, today’s report showed. March exports were revised higher to NZ$4.61 billion.

Milk powder, butter, meat, lumber and wool led the rise as commodity prices increased 1.6 percent in April from March to a record, according to an index released earlier this month and calculated by ANZ National Bank Ltd. From a year earlier, the index jumped 25 percent.

Dairy exports, which make up a fifth of overseas sales, surged 32 percent from a year earlier to NZ$1.19 billion, today’s report showed. The value was the second-largest on record after March.

Fonterra Cooperative Group Ltd., the world’s largest dairy exporter, said May 17 that milk production was likely to rise 4 percent in the year ending May 31. Last month, the Auckland-based company said export volumes reached a new high in March because of surging demand in China, Southeast Asia and the Middle East.

China’s Appetite

In the year ended April, total exports to China, New Zealand’s second-largest market after Australia, surged 40 percent, today’s report showed.

Imports rose 7.2 percent from a year earlier to NZ$3.54 billion, the slowest increase since August last year. The year-earlier figure was bolstered by the purchase of a navy vessel.

Imports were led higher by fuel, reflecting a 26 percent jump in crude-oil prices from April last year. Portable computers, telecommunications equipment and aluminum oxide imports also increased, the statistics agency said.

New Zealand posted a trade surplus of NZ$1.19 billion in the 12 months ended April 30. The gap widened from a revised NZ$734 million in the year through March and was the largest since November. Economists expected a 12-month surplus of NZ$571 million.

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