Trade Balance Remains In Surplus

Trade Balance Remains In Surplus

·         Trade balance in surplus for third straight month

·         Exports and imports both fell in April

·         Annual trade balance of –NZ$4.1 billion recorded

New Zealand’s trade balance remained in surplus for the third straight month in April, though narrowed to NZ$276 million (J.P. Morgan NZ$600 million, consensus NZ$250 million) from NZ$447 billion in March (revised up from NZ$324 million). The surplus - 7.5% of exports - was the largest for an April month since 2001, according to Statistics New Zealand (SNZ).

Both imports and exports fell in April, but the fall in imports was much sharper. Imports were down 18.1%oya, marking the largest dollar decline on record. According to SNZ, the sizeable on-year-ago fall was mainly owing to imports of large, one-off capital items in April 2008; thus, the April 2009 number came off an inflated base. The 4.6%oya drop in exports was mild in comparison, although marked the second largest decrease in exports since August 2007. The fall in exports was owing to fewer exports of crude oil, which tumbled 61.3%oya. Both the trend in imports and exports continued to decline in April.  

The next economic data point to look out for is the RBNZ’s inflation expectations survey due later today. Inflation expectations probably fell again in 2Q. In the March quarter, the survey showed those surveyed expected inflation to average 2.3% in two years’ time. With our forecast calling for at least six straight quarters of negative growth, we expect that inflation will moderate significantly, falling back within the RBNZ’s 1-3% target as soon as 2Q. With that in mind, and the domestic economy still soggy, we maintain our forecast for a 25bp cut to the OCR in June.

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