Fall in imports, healthy exports leads to trade milestone

Tuesday, 27 October 2020

A drop in car and fuel imports since lockdown helped drive New Zealand to its highest trade surplus in six years.

New Zealand exports have been holding up well despite the Covid-19 pandemic, Stats NZ says.

Figures for the year to September show the country has had its best goods trade surplus in nearly six years, since 2014 when dairy prices were very high.

A fall in imports and a $1.2 billion jump in exports gave the country an annual goods trade surplus of $1.7b, a reversal of its usual position.

“For most of the past 20 years, New Zealand had a goods trade shortfall, importing much more than it exports,” Stats NZ senior insights analyst Nicholas Cox said.

* Total exports increase despite coronavirus outbreak

“The goods trade surplus in September 2020 is unusually high because of the rapid drop in imports since February.”

However, ASB economist Nathaniel Keall said the strong surplus could be eroded if the pandemic eased and supply chains were fixed.

New Zealand has imported an extra $216m worth of face masks over the past year.

‘’Again, we emphasise the caveat that an improving trade balance isn’t always the sign of a healthy economic outlook.

‘’The trade balance fell during the last global financial crisis as soggy domestic demand weighed on imports but key export sectors – like agriculture – proved relatively more resilient. We continue to see broadly similar themes this year.’’

Imports dropped $5.9 b during the September year, due in particular to fuel and cars.

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Crude oil imports fell $1.7b and cars by $1.1b, offset slightly by a rise in face masks (up $216m) and the arrival of navy ship HMNZS Aotearoa in June.

Meanwhile, exports were on the rise, driven by milk powder, butter, and cheese (up $1.4b), beef (up $433 million), and gold kiwifruit (up $377m).

New Zealand also exported more breathing equipment, which rose in value by $348m during the year.

September itself was not such a great month, recording a monthly deficit of $1b. That was well below the September average of $1.3b over the past five years.

Dairy exports rose in volume but generated less in returns, although Cox said September was typically a low point in the dairy export season.

“Global dairy auction prices were slightly weaker in July and August, before recovering somewhat since early September.”

Returns on milk powder, butter, and cheese exports fell $97m last month, led by falls in milk fats including butter (down $35m) and milk powder (down $31m).

Cox said butter and milk powder prices slid during the month, but export volumes for both commodities were up 8 per cent and 4 per cent, respectively.

Preparations of milk, cereals, flour, and starch – which include infant formula – fell in value by more than a quarter or $53m, and by 29 per cent in quantity.

Total exports in September slid 8 per cent or $350m to $4b, thanks in large part to a $110m decline in crude oil exports, which are often affected by the timing of shipments leaving New Zealand.

Imports in September also fell, down $643m or 11 per cent on a year ago, due to a fall in car imports.

Car imports have been falling since March’s lockdown, but are recovering from the low levels seen four months ago.

There was also a small rise in some commodities, including laptops, as more people worked from home.