Trade deficit in October as dairy exports to China fall

New Zealand's posted its largest monthly trade deficit for October in six years, while narrowing the shortfall from September, led by a fall in dairy exports to China while all main imports into the country rose.

The country's trade deficit narrowed to $908 million last month, to be the biggest deficit for the month of October in the last six years, from a September deficit of $1.4 billion and a shortfall of $169 million in the same month a year earlier, according to Statistics New Zealand. (See graph below) That compares to an expected deficit of $650 million in a Reuters poll of economists.

Exports fell 5.1 percent to $4.02 billion from the same month a year earlier, while imports rose 12 percent to $4.94 billion.

New Zealand has benefited from strong terms of trade this year as demand for dairy products and logs in China bolstered exports, while a historically high kiwi dollar has kept down the cost of imported goods. Dairy prices have nearly halved since the start of the year, as an oversupply in China weakened demand and pushed down prices, coinciding with a fall in log prices, easing the country's trade outlook.

Today's figures show exports to China fell some 40 percent to $638 million in October from a year earlier, while imports from the country's largest trading partner rose 18 percent to $144 million, led by fertiliser and mobile phones, Statistics NZ said. Milk powder, butter and cheese fell 24 percent to $1.1 billion in the month from the previous year. China is the biggest destination for New Zealand's dairy exports.

Meat and edible offal, the country's second largest export commodity, rose 4.2 percent in the month from a year earlier to $315 million. Logs, wood and wood articles fell 0.7 percent to $359 million from October a year ago.

Imports rose across all three categories, with capital goods, such as aircraft and machinery, rising 31 percent to $239 million. Intermediate goods, like industrial supplies, increased 7.7 percent to $153 million and consumption goods, such as video games or processed food and beverages, up 8.7 percent to $99 million.

On an annual basis New Zealand's trade balance was a deficit of $107 million, for the first annual shortfall since December 2013, as exports rose 8.6 percent to $50.8 billion, while annual imports climbed 6.5 percent to $50.9 billion.

New Zealand posted a trade deficit of $2.77 billion in the three months ended Oct. 31 as exports fell 1.8 percent to $11.1 billion, while imports rose 7.2 percent to $13.9 billion.

(BusinessDesk)