NEW ZEALAND – New Zealand moved into a trade surplus in February as higher dairy prices, a weaker currency, and greater demand from China helped exports outpace imports, ending six months of trade deficits.
The trade surplus rose to $194 million, or 5 per cent of the value of exports, from a deficit of $3 million in the previous month, according to the latest overseas merchandise trade figures from Statistics New Zealand. That was broadly in line with the $200 million forecast in a Reuters survey. The trade balance for the year ending February was $758 million, shy of the $820 expected by the market.
The value of exports rose 17 per cent to $3.9 billion in February compared to the same months a year ago, its highest level since May last year. The biggest export increases came from the milk powder, butter and cheese commodity group, which rose 28 per cent to $212 million, dominated by unsweetened whole milk powder. Cereals flour and starch saw the biggest decreases in the month, down 30 per cent to $24 million.
China accounted for the biggest rise in exports, with shipments to the world’s third biggest economy rising 85 per cent to $284 million in the month, largely due to rising demand for dairy products.
“The outlook for NZ’s trade balance is naturally heavily dependent on the performance of soft commodity prices and global demand,” said Philip Borkin, an economist at Goldman Sachs & partners.
He said the market would closely watching Fonterra Cooperative group’s globalDairyTrade auction next week for signs of any price weakness, with the average price of milk powder having fallen 8.2 per cent previously.
In February, imports rose to $3.7 billion up 23 per cent from the same month last year. The one-off import of aircraft accounted for the biggest contribution to the increase, up $233 million, followed by petroleum products, up 32 per cent to $160 million.
That was offset by a decline in exports of salt, earths, stone, lime, and cement, which fell 63 per cent to $17 million compared to the previous year.
The biggest increase in imports came from the US due to the aircraft purchase, with total imports gaining to $277 million in February. That was followed by Russia, with an addition $93 million worth of crude oil imported during the month, largely reflecting a spike in global energy prices.
The New Zealand dollar remained a factor in February, having declined 3.8 per cent in the month, which boosted the affordability of exports but hampering the buying power of importers.
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