Trade deficit surprises

New Zealand's trade balance between exports and imports has delivered a surprise $305 million deficit, with analysts prompted to raise concerns about the effects of the pending drought.

The reported trade merchandise deficit in January of $305 million was well adrift of the $100 million to $125 million surplus expected by the market and was driven mainly by a decline in dairy and oil exports during the month.

ASB senior economist Jane Turner cautioned that dry weather expected in coming months would weigh heavily on dairy exports; BNZ chief economist Craig Ebert similarly expected a negative ''drag'' on dairying to be reflected in first-quarter gross domestic product data.

Ms Turner said in averaging through, the trend in the trade balance during late 2012 to early 2013 appears to be one of gradual recovery led by exports.

''However, the recent lift in exports may not be sustained. Dry weather conditions will weigh on dairy exports over coming months,'' Ms Turner said.

Mr Ebert said Fonterra's decision yesterday to hold its milk price payout forecast unchanged at $5.50 per kg of milk solids was ''a touch disappointing'', given strong global prices since December.

''What's obvious is that the North Island dry spell is hurting production,'' he said.

Following a good first half of the season, Fonterra expects total season production to be up 1%, which highlights the negative effects of the dry North Island.

''The North Island dry will impart a big drag on first-quarter GDP,'' he said.

Exports v imports in January
• The value of exported goods fell $378 million, or 10%, to $3.3 billion, led by declining values of milk powder, butter and cheese, and crude oil.

• The value of imported goods fell $234 million, or 6%, to $3.7 billion, large capital item imports (in transport) having affected this movement.


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