Trade still supporting growth, says HSBC

Trade still supporting growth, says HSBC

The merchandise trade balance remained in surplus in October in year to date terms, which combined with the boost from the Rugby World Cup, suggests that growth is still getting solid support from overseas. Goods exports increased by 5.3% in the month while imports fell by 2.1% in seasonally adjusted terms. Meat, wool and oil exports were a key support, though dairy exports have eased after rising to very high levels. Structural demand from the expanding middle classes in Asia is expected to continue to support New Zealand’s exports, though the risk that European sovereign debt problems affect Asia has increased.

Facts - The merchandise trade balance, in seasonally adjusted terms, returned to positive territory in October. In year to date terms, the trade balance remained in surplus at NZ$627 million (ahead of consensus at NZ$490 million).

- Exports rose by 5.3% in October, while imports fell by -2.1%.

- Over the year, the strongest components on the export side were meat, up 22%, crude oil, up 37%, (reflecting higher prices) and wool, up 43% (also mostly due to prices).

Implications Today’s trade data continue to highlight that growth in New Zealand is now being driven more by external trade than it has been in the past.

The trade balance has now been in surplus (in year-to-date terms) for 17 months after more than 7 years in deficit.

Continued growth in exports suggests that increasing global uncertainty about the European debt situation had not yet materialised in falling demand from New Zealand’s main trading partners in October.

Bottom line Up to October the New Zealand economy was still getting support from external demand, with the trade balance in surplus.

Going forward, the risk is that foreign demand weakens. However, to date, dairy and meat prices still remain at elevated levels.

Paul Bloxham, Chief Economist (Australia and New Zealand) Luke Hartigan, Economist (Australia and New Zealand)

HSBC Global Research Economics - Data Reactions 24 November 2011

© Scoop Media