NZ Current Account Deficit Lowest Since 2004

New Zealand's Current Account deficit narrowed less than economists expected in the first quarter, revealing a shortfall of -NZ$2.16 billion versus the forecast -NZ$1.67 billion. Still, this is the lowest deficit in nearly four years. A 20% appreciation in dairy prices helped bolster export figures, improving the trade side of the Current Account equation. That said, most of the gap comes from the investment income portion of the metric. The balance on goods and services shows a surplus of NZ$1.26 billion, while the balance on income and transfers shows -NZ$3.41 billion. Put simply, foreigners earned more from New Zealand's assets than New Zealanders earned from investments abroad. Looking ahead, the current improvement is likely short-lived. Oil prices rose substantially in the second quarter, which will surely inflate the cost of imports. Meanwhile, a drought is expected to cut farm production and depress export volumes. These developments will cause the goods and services portion to deteriorate, bringing the headline figure lower.

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