NZ reported its biggest annual trade surplus in 28 years as coronavirus led to a severe drop in imports. The official numbers revealed that NZ recorded a surplus of $2.2 billion for the year ended October due to a 10% slump in imports during the time, particularly in cars and fuel.
There was a $501 million deficit in October, just under half the size of the $1.04 billion deficit posted in 2019. NZ sent more of its key products abroad, including fruits and dairy products.
Exports of aircraft and aircraft components rose $69 million on pcp as aircraft were sent to US for long term storage. Export of breathing equipment also increased.
Image Source: Stats NZ
Monthly imports fell partly due to travel restrictions
Imports dropped $759 million to $5.3 billion in October 2020 compared to October last year, driven by mechanical machinery and equipment. Car imports rose to nearly $400 million a month in October 2020, continuing a rebound from low levels in April.
Alisdair Allen Trade Manager Stats NZ stated that imports have fallen partly due to international and domestic travel restrictions imposed to control the spread of coronavirus. Subsequently, annual imports of items like fuel, cars and turbojets witnessed massive falls.
However, imports were beginning to rise again as international restrictions lessened and supply chains began to operate, Mr Allen noted.
In April and May, imports of cars and trucks fell sharply as COVID-19 threatened both the international supply chain and the local market for new vehicles, with car dealerships closed during the lockout of level 4 that lasted until 27 April.
Exports persist in declining in October
Exports declined by 4.4% to $4.8 billion in October 2020 compared to the same month, the previous year.
Milk powder, butter, and cheese exports were down by $198 million while for beef, down by $112 million representing weaker prices for sheep meat. They were the significant falls in October 2020. For dairy products and meat, all prices and quantities were reduced in October 2020 relative to the same month last year.
The decline in some exports was slightly offset by an increase in log exports (up to $108 million).
Nat Keall ASB Economist stated that international trade has proved to be remarkably resilient, which was a boon to the small exporting economy of NZ. He noted that delays in shipping, shortages of containers and other transport disruption remains as factors, but he expected that big surplus would vanish with time.
For some time, the trade balance in NZ could remain optimistic, with increasing economic growth in China's key market and better prices for primary commodities. However, a return to annual deficits appeared as a possibility.
(NOTE: Currency is reported in NZ Dollar unless stated otherwise)