Trade surplus despite export fall
The drought took a toll on New Zealand's trade balance last month, with a fall in exports, particularly meat, producing a much smaller surplus than analysts expected.
There was a trade surplus of $71 million in May, well below the consensus forecast of $427m, and exports dropped a seasonally adjusted 2.7 per cent to $4.08 billion.
As a result, New Zealand's trade deficit widened to $869m from $694m in April.
The surplus was surprisingly small for a May, and economists placed much of the blame on the drought.
Meat exports dropped 18 per cent by value, a result of farmers being forced to send their stock to the works earlier than usual.
"We expect a reversal in the June data," Westpac said.
Another probable reason for meat volumes being down was the certification issues in China that held up meat at the wharves, Christine Leung, of ASB, said.
"With the debacle resolved at the end of May, we expect to see a slight recovery in meat export volumes over the coming months as the backlog is cleared," she said.
The bright spot on May's export scene was China, which received 30 per cent more goods year-on-year, largely in logs.
New Zealand imported fewer goods last month.
The value of imports fell 3.9 per cent to $4.01b, driven largely by declines in avgas, petrol and machinery.
Economists expect a pick-up in exports and domestic demand.
Exporters were set to get a boost from a lower New Zealand dollar and rising commodity prices, and manufacturers could expect an upturn in domestic demand through the Canterbury rebuild.
However, the rebuild would also increase demand for imports from the end of the year, Westpac said.
"We expect trade deficits to persist from that point," it said.