New Zealand’s pick-up in underlying trade balance likely to continue over coming months, says ANZ Research

New Zealand’s pick-up in the underlying trade balance is expected to be maintained over the coming months driven by both seasonal factors and better underlying drivers. A good end of summer and early autumn for most farmers lifted milk flow, which will result in higher volumes of dairy exports.

The trade balance clocked up another surplus of NZD578 million in April. The monthly surplus was better than our own (NZD360 million) and market expectations (NZD267 million). A better export performance led the charge driven by seasonal factors, a broad-based pick-up in demand from Asia supporting commodity prices, and a lower NZD.

Imports remained fairly solid driven by the familiar story of strong motor vehicle and capital goods imports. Capital goods imports of machinery and plant maintained their recent strength, suggesting good business confidence levels over the last year are supporting more investment to help alleviate capacity pressures.

Exports to China in the three months to April are up 24 percent over the same period last year. Elsewhere, both developed and emerging markets in Asia showed notable strength in April and over the last three months. These markets appear to have been prioritised over Western markets, such as Europe and US.

"It is likely the annual trade deficit should continue to narrow through this period," ANZ Research commented in its latest report.