Brian Fallow

The Economics Editor of the NZ Herald

Monthly deficit widest in years

November had the largest trade deficit since 2006. Photo / BOP
November had the largest trade deficit since 2006. Photo / BOP

The trade deficit widened in November as New Zealand imported $1.18 worth of goods for every $1 of exports.

The trade accounts are usually in the red in November but this was the largest November deficit since 2006, Statistics New Zealand said.

The monthly deficit of $700 million pushed the annual deficit to $1.5 billion, $190 million wider than in the year ended October and $550 million wider than in the year ended September.

Infometrics economist Benjamin Patterson said the latest expansion in the deficit was in keeping with recent trends, where exports have fallen while a gradually improving domestic economy ensured imports grow.

Exports at $3.8 billion were 2.4 per cent down on November 2011, driven by a 10 per cent drop in the value of dairy exports.

Imports at $4.5 billion were just 0.6 per cent higher than a year earlier, but only because November 2011 saw the importation of an aircraft worth $220 million.

Excluding that, imports were up 5.9 per cent.

In the three months ended November exports were 5.6 per cent down on the same period of 2011, with two-thirds of the decline accounted for by a 14 per cent fall in dairy exports. That was despite an 11 per cent rise in the volumes of dairy products shipped and can be explained only partly by exchange rates having moved against exporters in the interim - by 3.4 per cent in the case of the US dollar. ANZ's commodity price index recorded a 9 per cent drop in world dairy prices between the March 2011 quarter and the same period last year.

The November month's figures are more positive, however. The value of dairy exports rose 25 per cent on October, underpinned by a 21 per cent rise in volumes which followed three consecutive months of decline.

"We initially thought these declines were due to dairy volumes normalising as the new season starts," ASB economist Jane Turner said. "However, the bounce in November volumes points to a stronger underlying trend."

ASB expects dairy prices to continue to rise over 2013, as the impact of lower herd sizes in the United States, following the drought last year, reduces global dairy production.

Imports in the three months ended November were up 1.3 per cent on the same period of 2011. That included a 4.2 per cent rise in imports of plant and machinery, while imports of consumer goods were flat.

Westpac economist Nathan Perry said that over the next 18 months increasing earthquake-related imports of construction machinery and equipment would dominate improving export prices.

"As a result, the trade deficit will widen over this period."

- NZ Herald

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