The trade deficit went from bad to worse last month as imports exceeded exports by 30 per cent or nearly $800 million.
The worse-than-expected figure pushed the annual trade deficit to $6.3 billion, from $6.2 billion in the year ended June and $5.9 billion in the year endedMay.
Deficits are normal in July but last month's was twice the 10-year average, measured as a percentage of exports. Exports fell 12.6 per cent to $2.6 billion.
Imports at $3.4 billion were 7.6 per cent lower than in July last year, but almost all of the difference - $244 million out of $282 million - is explained by the importation of aircraft in July 2006.
Excluding that, imports were down 1 per cent, but since the exchange rate climbed 21.7 per cent on a trade-weighted basis over that period, that could mask an increase in import volumes.
Deutsche Bank chief economist Darren Gibbs said that after adjusting for price movements, export volumes were flat in recent months compared with a year earlier, while import volumes were up about 9 per cent.
Bank of New Zealand economist Craig Ebert said the moderation of the trade deficit from the extremes of early last year - it hit $7.3 billion in the year to February 2006 - looked to be stalling.
"This implies the current account deficit is stuck at a still high 8.5 per cent of GDP - hardly a comforting proposition, especially at a time when financial markets are nervous about excesses and how they are being financed."
On the other hand, Ebert said, the impact of higher dairy prices had yet to be felt in the trade accounts.
