Trade deficit narrows as imports fall faster than exports

A monthly deficit of $350 million and an annual gap of $2.98 billion was expected in the New Zealand trade. Photo / Warren Buckland

New Zealand's merchandise trade deficit narrowed in July from the same month last year as imports such as crude oil fell faster than exports such as milk powder and meat.

The trade deficit was $433 million last month, from a surplus of $110 million in June and from a deficit of $730 million in July 2015, Statistics New Zealand said. The annual trade gap narrowed to $3.03 billion from $3.3 billion in the 12 months to June 30.

A monthly deficit of $350 million and an annual gap of $2.98 billion was expected, based on a Reuters survey.

Falling crude oil prices contributed to a 10 percent decline in imports to $4.4 billion in July from a year earlier, accounting for more than one-third of the $503 million decline.

The drop reflected a decline in global crude oil prices and in the volume imported, Statistics New Zealand said. Brent crude dropped as low as US$27.88 a barrel in January and had recovered to US$50.35 a barrel by the start of July, down from about US$62 a barrel a year earlier.

Global crude prices also had a bearing on New Zealand's dairy exports, with energy export-dependent Algeria recording the biggest decline in shipments of New Zealand dairy products last month - down 55 percent by value and 45 percent by quantity. Algeria is the third-biggest market for New Zealand milk powder.

Overall New Zealand milk powder exports fell by 23 percent, or $118 million, last month, while the quantity rose 0.9 percent, contributing to a 4.9 percent decline in total exports to $4 billion. Meat and edible offal exports fell by 19 percent, or $97 million.

"The meat export falls this month are partly due to record meat exports this time last year," said international statistics senior manager Jason Attewell. "Meat values in July 2015, off the back of a record high meat season, were 31 percent higher than the average value for the previous five July months."

Exports of fruit fell 5.7 percent by value but rose 3.9 percent by volume last month.

China remained New Zealand's largest market in the 12 months ended July 31, taking a total $9.1 billion, up 3.6 percent from a year earlier. Exports to Australia fell 1.3 percent to $8.4 billion, exports to the US rose 0.2 percent to $5.6 billion and to Japan rose 0.9 percent to $3 billion.

Asia was the biggest regional market, taking $21.8 billion of New Zealand's total $48.6 billion of exports, up 3.6 percent in the year.

China was also the largest source of imports, sending $10.5 billion of goods to New Zealand in the latest year, up 10 percent, resulting in a $1.4 billion bilateral trade deficit for New Zealand.

Australia was second, sending $6.5 billion of products, up 3.4 percent, while the US was in third place on $6.1 billion, down 0.4 percent.

New Zealand's exports of dairy products fell 8 percent to $11.1 billion in the latest year, while meat exports rose 0.5 percent to $6.5 billion, logs and wood rose 10.4 percent to $3.9 billion and fruit jumped 24 percent to $2.6 billion.