Economists underwhelmed by trade figures

Rising sales of dairy products, logs and pleasure boats helped boost New Zealand's exports by 12 per cent in July, official figures show, although the figures have underwhelmed economists.

Statistics New Zealand said this morning that New Zealand exported $3.6 billion worth of goods last month, an increase of $394 million compared to July 2009.

Dairy products were the main driver of growth, with exports of milk powder, butter and cheese up $179m or 32 per cent.

Statistics New Zealand said exports of pleasure boats and pinus radiata-based commodities - mainly logs - "were other significant contributors'' to the increase.

Australia, already New Zealand's largest trading partner, was the destination for much of the increase, with exports across the Tasman up 13 per cent or $96 million.

China, up 30 per cent, and South Korea, up 58 per cent, also bought significantly more New Zealand products that a year ago.

Imported goods also rose significantly, up 12 per cent or $402 million, with petrol, cars and fertiliser all increasing. This led to a trade deficit of $186m, equivalent to 5.2 per cent of total exports.

The trade figures were weaker than the market had been expecting, with economists forecasting a deficit of around $40m.

Jane Turner at ASB said there had been signs in recent months that dairy prices were weakening, as well as early signs of a fall in demand for forestry products, which would reduce support for the trade balance over the next year.

"While we continue to expect an export-led recovery over the next year, it appears growth in the key drivers may be starting to slow slightly.''

There is growing expectation among economists that the Reserve Bank will hold off raising the official cash rate in the coming months, as the economies of many of our major export markets weaken.

ANZ economist Mark Smith said this morning's trade data "strengthens the case for the [Reserve Bank] to remain on the sidelines until global developments improve''.

- © Fairfax NZ News