NZ: Q3 current account narrowed slightly to 2.6% of GDP - Westpac

Michael Gordon, Research Analyst at Westpac, notes that New Zealand's current account deficit narrowed in the September quarter. However, more recent figures show a surge in capital imports, he further adds.

Key Quotes

“New Zealand's current account deficit narrowed slightly to 2.6% of GDP in the year to September. That compares to a deficit of 2.7% in the year to June (revised from 2.8%, thanks to upward revisions to nominal GDP). The deficit was larger than we expected, due to higher imports and lower earnings from overseas investments.”

“In seasonally adjusted terms, the goods trade deficit narrowed to $26m, the smallest deficit in three years. Exports were fairly steady in the September quarter, while imports fell, though not as much as we expected. The surprise was due to conceptual adjustments (such as the timing of changes of ownership), which is not a persistent factor.”

“The surplus on services trade narrowed to $1,186m in September. However, it didn't fully unwind the jump in tourism earnings in the June quarter, which was boosted by the Lions rugby tour.”

“The investment income deficit widened to $2,384m in September, compared to $2,072m in June. Earnings from New Zealanders' investments abroad fell by more than we expected. Investment income outflows also fell slightly.”

“This result has no major implications for our forecasts. We have been expecting the annual deficit to narrow further, with dairy export prices and volumes both stronger than they were a year earlier. However, a recent surge in imports challenges our view on how far the deficit will narrow.”