New Zealand posted its smallest October trade deficit since the mid-1990s as milk powder, butter and cheese shipments drove exports to a record for the month.
The trade deficit narrowed to $168 million last month, from $216 million in September, narrowing the annual trade gap to $1 billion from $1.55 billion, according to Statistics New Zealand. The trade figures compared to a forecast deficit of $350 million in the month and $1.14 billion in the year in a Reuters survey.
Exports rose by 23 per cent, or $783 million, to $4.2 billion in October compared to the same month last year, of which $690 million reflected increased exports of milk powder, butter and cheese, which jumped by 85 per cent to $1.5 billion.
In September, Fonterra raised its forecast 2014 payout to a record $8.62, made up of a farmgate milk price of $8.30 and an unchanged dividend of 32 cents, citing continuing global demand for whole milk powder.
The value of milk powder, butter and cheese climbed 4.6 per cent in the 12 months through October to $12.2 million, making up 26 per cent of total exports of $46.8 billion in the period.
China was the biggest destination for New Zealand's exports last month, taking $1.1 billion worth, up 133 per cent from a year earlier. Shipments to Australia fell 13 per cent to $794 million. On an annual basis, Australia is still the largest market, taking $9.18 billion of exports, while China took $8.87 billion and the US took $4.1 billion.
"We expect to see this trend maintained over the coming months, as the strong rebound in agricultural (and in particular dairy) production since last summer's drought, coupled with strong commodity prices, is reflected in higher export revenues" said Anne Boniface, senior economist at Westpac Banking Corp.
Imports rose 5.7 per cent to$4.4 billion, led by vehicles, parts and accessories.
China was the largest source of imports, rising 9.2 per cent to $797 million in the month and 4.4 per cent to $8.1 billion in the year. Imports from Australia fell 1.9 per cent to $613 million and fell 7.8 per cent to $6.6 billion in the year. Imports from the US rose 11 per cent to $408 million in October from a year earlier and fell 5 per cent to $4.4 billion in the year.