New Zealand's Annual Trade Deficit Widens on Imports

New Zealand's annual trade deficit widened in December as purchases of imported fuel, steel and consumer goods outpaced a gain in exports, suggesting record- high interest rates haven't cooled domestic demand.

The merchandise trade shortfall widened to NZ$6.16 billion ($4.2 billion) in the year ended Dec. 31 from NZ$6.03 billion in the 12 months to November, Statistics New Zealand said today in Wellington. In December, imports rose 12 percent from a year earlier, the fifth annual increase in the past six months.

Increased imports add to signs consumer and business spending may be strengthening in the $102 billion economy. Reserve Bank of New Zealand Governor Alan Bollard last week said he will probably raise borrowing costs this year unless domestic demand cools.

``It looks as though import growth is starting to rebound,'' said Craig Ebert, senior market economist at Bank of New Zealand Ltd. in Wellington. ``Imports are an extra worry for the Reserve Bank as a demand indicator. They are in line with a forecast for the economy that will keep adding pressure to the Reserve Bank to tighten monetary policy further.''

Economists expected the annual trade gap to be NZ$6.2 billion gap in the 12 months ended Dec. 31, according to the median of nine forecasts in a Bloomberg News survey.

New Zealand's dollar bought 68.82 U.S. cents at 12:45 p.m. in Wellington from 68.80 cents before the report was released.

Ten of 13 economists surveyed by Bloomberg News last week expect Bollard will raise the official cash rate a quarter-point to a record 7.5 percent when he next reviews rates on March 8.

Bollard said on Jan. 25 that domestic demand has rebounded, stoked by cheaper fuel pries and increased immigration.

Demand For Imports

Consumer demand for imports also has been buoyed by a jobless rate close to a record low and a buoyant housing market. House sales surged 19 percent in December from a year earlier, according to figures from the Real Estate Institute.

Consumer confidence in New Zealand rose to a nine-month high, according to a Roy Morgan Research poll published yesterday. Two-thirds of those surveyed said it was a good time to buy a major household item.

Imports rose 12 percent in December from a year earlier to NZ$3.33 billion. Economists expected a 13 percent increase. Fourth-quarter imports climbed 7.1 percent from a year earlier. Imports in the year ended Dec. 31 gained 9.4 percent.

In December, imports of consumption goods increased 6.8 percent from a year earlier, the statistics agency said. Purchases of cranes and engine parts for wind turbines buoyed imports of mechanical machinery. Imports of generators, steel and fuel also gained.

Fuel imports rose 20 percent, buoyed by an 11 percent jump rise in crude oil volumes and higher prices.

Exports Gain

Exports rose 9.3 percent in December from a year earlier to NZ$2.90 billion, the statistics agency said. Economists expected a 9.4 percent increase. Fourth-quarter exports advanced 9.8 percent from a year ago. Full-year shipments gained 12 percent.

Sales of dairy products, which make up a sixth of overseas shipments, increased 6.1 percent in December from a year earlier. Exports of meat, aluminum, wine and logs also gained, the statistics agency said.

Exports of apples, aluminum and other commodities make up about 70 percent of total overseas sales. The price of New Zealand commodity exports is rising after adjustment for the weaker local currency. The New Zealand currency fell 7.1 percent against the euro and 9.2 percent against the British pound in the year ended December.

Analysts prefer to watch a rolling, 12-month trade deficit or compare with year-earlier periods because the monthly trade figures are volatile and aren't seasonally adjusted.

In December, there was a trade deficit of NZ$433 million. That compared with a NZ$311 million gap a year earlier and NZ$806 million in November. Economists expected a NZ$500 million shortfall.
source:www.bloomberg.com