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NZ: Larger than expected trade deficit - ANZ

According to Phil Borkin, Senior Economist at ANZ, at face value, the New Zealand’s monthly trade deficit was larger than expected in October, but a large one-off import affected the figures and by Stripping that out, the trade picture looks reasonable.

Key Quotes

“Looking forward, there are a number of moving parts. The NZD has fallen, commodity prices remain elevated (although dairy has weakened) and primary production has been affected by a wet start to the season. Import growth looks reasonable right now, but arguably the softening domestic demand picture presents some headwinds. While it is far from a clear picture, we see the underlying trade balance remaining broadly stable over the next year or two.”

Key Points

  • An unadjusted trade deficit of $871m was recorded in October, which was slightly larger than market expectations. However, a large one-off import of $257m (likely to be an aircraft) affected the numbers. Stripping this out, the monthly deficit would have been $614m, which is actually on the low side for this time of year. 
  • In seasonally adjusted terms, the deficit widened to $366m, which is the largest deficit in six months. However, in trend terms, the deficit, at $149m, remains only modest and below the monthly average experienced since the start of 2015 (of ~$220m).  
  • Seasonally adjusted export values rose 4.9% m/m. There has certainly been some volatility lately, driven largely by dairy exports. However, they seemed far better behaved in the month, rising 2.1% m/m. Meat export values were strong (up 21% m/m) while fruit exports experienced their second consecutive large fall (down 32% in two months), with the late-season harvest this year likely having some impact. 
  • Import values rose 7.1% m/m in seasonally adjusted terms. That occurred despite a 10% m/m fall in petroleum imports. As mentioned, the large one-off import would have played a role. Looking through this, the Statistics NZ trend measure is growing at a reasonable 0.6% m/m pace.”

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