New Zealand Annual Trade Deficit Narrows on Milk and Log Exports

New Zealand’s annual trade deficit unexpectedly narrowed in the year through June, boosted by overseas shipments of milk powder and logs.

Imports exceeded exports by NZ$747 million ($585 million), in the 12 months through June compared with a revised NZ$876 million shortfall in the prior period, Statistics New Zealand said today in Wellington. Exports rose 6.2 percent in June from the year-earlier month, and the monthly surplus widened to NZ$331 million from a revised NZ$232 million.

New Zealand has posted three straight months of annual trade deficits as falling commodity prices and a weaker outlook for global demand curb shipments abroad, which make up 30 percent of the economy. New Zealand farmers expect declining profits and plan to spend less over the next 12 months, a survey showed yesterday.

“We expect the recent falls in the price of New Zealand’s export commodity basket to begin to have a greater influence on the trade accounts, and see the annual balance move further into deficit,” Philip Borkin, economist at Goldman Sachs New Zealand Ltd. in Auckland, said in a July 20 note.

New Zealand’s dollar fell after the report, buying 78.26 U.S. cents at 11:07 a.m. in Wellington compared with 78.30 cents before the data. The annual deficit was smaller than the NZ$1 billion median estimate in a Bloomberg News survey of eight economists, and the monthly surplus was wider than the NZ$2 million surplus economists expected.

Exports of dairy products were unusually high in June, the statistics agency said. The volume of milk powder, butter and cheese shipments surged 27 percent from May, it said.

Rising Imports

Imports rose 5.2 percent to NZ$47.4 billion in the year ended June 30, led by purchases of fuel, machinery and vehicles, today’s report showed. Exports gained 1.3 percent to NZ$46.7 billion as meat sales fell. Annual dairy sales, which make up a quarter of the total, gained 2.6 percent, the report showed.

In June, imports fell to NZ$3.87 billion from a revised NZ$4.18 billion a month earlier. Fuel purchases declined.

Exports dropped to NZ$4.2 billion in June from a revised NZ$4.41 billion in May, reflecting the seasonal peak in farm production, the report showed. Economists predicted NZ$3.83 billion. Dairy sales gained 9.9 percent from the year-earlier month to NZ$979 million.

Prices for the country’s commodities in world markets dropped for a fifth month in June, declining 2.4 percent, according to an ANZ National Bank Ltd. index. After adjusting for a stronger local currency, prices fell 3.4 percent from May and 16 percent from June last year.

RBNZ Rates

Reserve Bank of New Zealand Governor Alan Bollard will probably leave the official cash rate at a record-low 2.5 percent at a policy review tomorrow, according to all 16 economists in a Bloomberg News survey.

A net 39.5 percent of the 889 farmers polled in early July estimated their profits will decline over the next 12 months, according to a survey conducted by Federated Farmers of New Zealand. The outlook has deteriorated since a January survey, when 31.6 percent expected profits would increase, the group said in a statement yesterday. The net measure subtracts pessimists from optimists.

Fonterra Cooperative Group Ltd., the world’s largest dairy exporter, said in May it would pay its farmer suppliers about 9 percent less for their output in the new season that began June 1 because of a slump in milk powder prices.

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