New Zealand ran a surprise $486 million trade surplus in December - a far better result than market forecasts of a deficit of about $100m.
It was the largest trade surplus recorded for a December month as a percentage of exports in 21 years.
In part, import costs are coming down because of a stronger New Zealand dollar, up 8 per cent in the past year to trade about US83.6c yesterday.
The unexpectedly strong surplus narrowed the annual trade deficit to $1.2 billion, compared with $1.39b in the November year.
The biggest shock in the monthly figures was that imports fell 10 per cent - by $403m to $3.6b.
But BNZ economist Doug Steel said the import slump did not indicate a downturn in domestic demand.
In fact, the trade figures suggested December quarter economic growth figures could be better than the 0.7 per cent BNZ forecast earlier, perhaps as much as 1 per cent growth. That would be well ahead of the Reserve Bank's pick of just 0.4 per cent growth for the December quarter.
As for the surprise drop in imports, in December 2011 there were big one-off imports of helicopters that were not repeated in December 2012. Crude-oil imports also fell sharply, but shipments can be volatile.
Aside from those sectors, there was a general decline in all import sectors, which could be partly put down to the strong gain in the currency in the past year, BNZ said.
Taking out the big one-off items and adjusting for exchange rate changes, imports were actually up 7 per cent in the December quarter.
"This suggests the economic recovery is continuing," Steel said.
Exports dropped just more than 5 per cent to $4.1b in December, but even that was better than the 7 per cent fall expected.
A big chunk of the fall in exports in December was due to the $113m drop in crude oil exports in the month, compared with the same period a year ago. Exports of oil can jump up and down due to the timing of shipments, but it is also likely to reflect declining production levels from the offshore Taranaki Tui oilfield.
Much crude is exported to Australia and so was a factor in pushing down sales across the Tasman, by $182m in the month.
In sharp contrast, monthly exports to China were up by a third, a rise of $182m, with rising sales of whole-milk powder, followed by meat and edible offal.
New Zealand's growing reliance on China as a trading partner and Australia's declining importance are reflected in the annual trade figures.
Exports to Australia in the past calendar year slumped by $1b, or more than 9 per cent.
On the other hand, annual exports to China jumped by $975m or 17 per cent, led by milk powder, butter and cheese, which were up more than $390m in the year.
Trade with China alone is now worth more than exports to Japan, South Korea and Britain combined.
In December, total exports of milk powder, butter and cheese fell $71m or by more than 5 per cent.
However, world dairy prices have improved in the December quarter, after slumping 20 per cent in the first three quarters of the calendar year, according to Westpac estimates. Export prices were turning up and that was expected to continue in 2013, Westpac said.
For the full December quarter dairy product exports took a tumble, with volumes down 15 per cent and values for milk powder, butter and cheese exports falling 12 per cent, in a downturn from a strong September quarter.
Dairy is New Zealand's top export commodity group.
But the dairy export volumes had been expected to fall after booming in the September quarter when volumes skyrocketed 36 per cent, boosted by last season's bumper grass-growing season.
And dairy volumes have started to pick up again in the past couple of months after a good start to the new grass-growing season.
Exports: down 5.1 per cent, or $217 million, to $4.1 billion
Crude oil exports down 47 per cent, or $113m, to $127m
Imports: down 10 per cent, or $403m, to $3.6b
Monthly trade surplus: $486m, or 12 per cent of exports
The December surplus is the largest for a December month as a percentage of exports since December 1991.
Do you feel better off than you were this time last year?