Trade deficit shrinks

The trade deficit continued to narrow last month as imports shrank more than exports.

The deficit for the month was just under $500 million as the country pulled in $1.16 of imports for every $1 of exports.

But that is smaller than the usual ratio of $1.30 for every $1 on average over the previous five Octobers.

It reduced the annual trade deficit to $1.2 billion, from $1.7 billion for the year ended September and $5.3 billion a year ago.

Of the 15 largest export commodities only one, wine, was up on October last year. Dairy products were down 32 per cent.

In all, exports were down 22.4 per cent on a year ago while imports fell 28.3 per cent.

Of the 15 largest import categories, only aircraft and pharmaceutical products were higher than a year ago. Imports of plant and machinery were down 23 per cent on October last year and consumer goods down 15 per cent.

China, the third largest export market, bucked the trend of declining exports, taking 21 per cent more than in October last year.

Exports to China over the past 12 months were up 55 per cent over the previous year.

However, looking ahead ASB economist Jane Turner said the trade balance was unlikely to hold on to its gains.

Exporters to the United States and Europe would find it challenging, with the strong NZ dollar and weak demand in these markets, she said. However, Australia would provide strong demand and a favourable cross exchange rate.