NZ: Exports recover some earlier weakness - ANZ

Philip Borkin, Senior Economist at ANZ, notes that At $292 million, the NZ’s headline (unadjusted) monthly trade surplus was above expectations in April (mkt: $25m) almost entirely due to stronger export values.

Key Quotes

“In seasonally adjusted terms, a $163m deficit was recorded, smaller than March’s $483m deficit (which was in fact the largest seasonally adjusted deficit since September 2014).

After some earlier (and admittedly surprising) weakness, seasonally adjusted export values surged 23% m/m in April. This follows falls of 7.8% and 17.2% m/m in February and March respectively. In fact, the level of March’s seasonally adjusted export values was the lowest since December 2009. Driving that weakness were sharply lower dairy and meat export volumes, and both of these categories recovered sharply in April (+30% m/m and +18% m/m respectively), which offset implied price falls in the month. Mechanical machinery and crude oil export values also rose.

Seasonally adjusted import values also lifted solidly in April, increasing 12% m/m (after falls of 6.2% and 7.5% m/m in February and March). Our own seasonally adjusted estimates suggest reasonably broadbased increases in the month across categories.

The sharp recovery in export values today is reassuring – the alternative would have presented a worrying picture indeed. We didn’t feel that the weakness in export values in February and March was indicative of the export environment overall and put it down more to timing (due to production, inventories, global conditions etc) rather than anything more concerning. The solid bounce today supports that timing thesis.

However, our baseline view is still that New Zealand’s trade accounts will deteriorate further over the next 12 or so months. NZD commodity export prices are still falling and with oil prices recovering, this is consistent with our expectation of a further circa 10% fall in the terms of trade over the year.”