N.Z. Annual Trade Deficit Narrows Less Than Forecast

By Tracy Withers

Aug. 26 (Bloomberg) -- New Zealand's annual trade deficit narrowed less than economists forecast in July as an increase in fuel shipments bolstered imports.

The gap narrowed to NZ$4.44 billion ($3.1 billion) in the 12 months ended July 31 from NZ$4.47 billion in the year through May, Statistics New Zealand said in Wellington today. The median estimate in a Bloomberg survey of 10 analysts was for a NZ$4.21 billion shortfall.

New Zealand's economy was probably in a recession in the first half of 2008, curbing consumer demand for imported computers and cars. Global oil prices have fallen by more than a fifth after reaching a record-high $145.29 a barrel in early July, adding to signs that the trade deficit will narrow further.

``The past month has seen a significant drop in world oil prices, which will act to reduce import values over August and September,'' said Jane Turner, economist at ASB Bank Ltd. in Auckland. ``Slowing domestic demand will see import demand moderate. We expect to see a continued recovery in the trade balance.''

New Zealand's dollar bought 69.76 U.S. cents at 12:40 p.m. in Wellington trading from 70.43 cents immediately before the report.

The deficit was close to a three-month low of NZ$4.42 billion in the year ended Feb. 28.

Rising Imports

Imports rose 22 percent to NZ$4.2 billion in July from a year earlier, the largest increase since May 2006. The gain exceeded the 16 percent forecast by economists.

Fuel imports led the increase, rising 58 percent, the statistics agency said. The largest contributor to the gain was diesel. The next largest jump was from mechanical equipment including machinery used in gas fields and irrigation projects. Electrical machinery imports were buoyed by purchases of television digital decoders, the agency said.

Exports rose 30 percent in July from a year earlier to NZ$3.42 billion. That matched the median forecast in the economists' survey.

Sales of milk powder, butter and cheese, which make up almost one-fifth of overseas shipments, increased 51 percent from a year earlier.

Exports of crude oil gained to NZ$316 million from NZ$50 million a year earlier. Oil is now New Zealand's third-largest export after dairy and meat following the commencement of production at the Tui field in July.

Economists monitor the rolling, 12-month trade balance because of volatility in the month-on-month figures, which aren't seasonally adjusted.

In July, there was a NZ$781 million trade deficit compared with an NZ$808 million gap a year earlier. Economists expected a NZ$538 million deficit.

To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net