New Zealand Exports, Building Permits Rise in Signs of Recovery

By Tracy Withers

June 29 (Bloomberg) -- New Zealand’s exports increased in May and home-building approvals rose for the third time in four months, adding to signs the economy may emerge from its deepest recession in more than three decades.

Exports climbed 5.8 percent from a year earlier, narrowing the annual trade deficit to the smallest in more than five years, Statistics New Zealand said in Wellington today. Home-building approvals advanced 3.5 percent from April, it reported.

A pickup in overseas shipments and an improvement in the housing market will help revive an economy that shrank 1 percent in the first quarter. Reserve Bank Governor Alan Bollard, who this month kept the benchmark interest rate at a record-low 2.5 percent, expects growth to return in the fourth quarter of 2009.

“The rate of contraction in the economy likely eased significantly in the second quarter,” said Darren Gibbs, chief economist at Deutsche Bank AG in Auckland. “While many nations have reported a huge decline in export receipts since late last year, the report highlights the relative resilience of New Zealand’s export sector.”

New Zealand posted a trade surplus of NZ$858 million ($552 million) in May, or more than three times the NZ$250 million expected by economists. The deficit in the year ended May narrowed to NZ$3.04 billion.

The NZX 50 stock index rose 0.5 percent to 2,784.58 as of 12:55 p.m. in Wellington. The New Zealand dollar traded at 64.47 U.S. cents from 64.54 cents before the figures were released. The five-year bond yield was unchanged at 4.87 percent.

Global Outlook

The outlook for New Zealand commodity exports is improving as the world’s largest economies emerge from recession. Japan’s industrial output jumped 5.9 percent in May, a pace that matched the steepest increase in 56 years, a report showed today.

The Organization for Economic Cooperation and Development last week raised its forecast for the economy of its 30 member nations for the first time in two years.

New Zealand fell into a recession in the first quarter last year. Finance Minister Bill English said last week he wants overseas shipments, which make up 30 percent of gross domestic product, to lead the recovery.

Exports rose to NZ$3.96 billion in May from a year earlier, led by a gain in sales of whole milk powder, logs, lumber and kiwifruit, the statistics bureau said. Commodity prices rose for a third month in May, according to an ANZ National Bank Ltd. index.

Still, the trade report also showed imports tumbled 21 percent from a year earlier to NZ$3.1 billion. The decline was the largest since February 1993 and was led by fewer imports of crude oil, gasoline and passenger cars.

Weak Economy

Demand for imports has tumbled as companies cut investment and as the highest unemployment rate in six years prompted consumers to reduce spending.

“The bulk of the turnaround in overseas trade is due to the import collapse” amid the weakness in domestic demand, said Annette Beacher, a senior strategist at TD Securities Ltd. in Singapore.

New Zealand’s monthly trade figures don’t adjust for prices. The value of oil imports fell 33 percent as prices slumped 30 percent, today’s report showed.

Business confidence slumped to an all-time low in the first quarter, according to a survey by the New Zealand Institute of Economic Research Inc. Investment intentions dropped to the lowest level on record, the Wellington-based institute said.

The jobless rate rose to 5 percent in the first quarter and may reach 8 percent by late 2010, curbing demand for imported computers and cars as consumers rein in purchases, according to the Treasury Department.

Rate Cuts

To revive demand, Bollard has cut the benchmark interest rate by 5.75 percentage points since July. Investment in housing contracted for a seventh straight quarter in the three months ended March 31, a government report showed last week.

House sales increased 44 percent in May from a year ago, according to Real Estate Institute figures published June 11.

While the number of home-building approvals climbed in May from January’s record low, it mainly has been boosted by apartments being built at retirement villages. Excluding apartments, approvals fell 3.1 percent from April and the underlying trend remains negative.

There were 275 apartment approvals in May, accounting for 22 percent of total approvals. Over the past year, apartments have averaged about 11 percent of the total.

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