Trade deficit widens as dairy values fall

Photo / Christchurch Star

New Zealand chalked up its third monthly trade deficit in October, repeating last year's pattern, as shipments of dairy products fell and imports rose.

The deficit was $718 million last month from a revised gap of $775 million a month earlier, according to Statistics New Zealand. The annual deficit widened to $1.37 billion from a deficit of $880 million in the 12 months through September.

Exports in the month were valued at $3.46 billion, up from $3.3 billion in September, though down from $3.89 billion in October 2011.

Shipments of dairy products dropped 20.2 per cent to $813 million in the latest month from a year earlier, while meat exports fell 6.6 per cent to $277 million. Log exports grew 5.1 per cent to $294 million and exports of crude oil tumbled 27 per cent to $132 million.

Imports grew to $4.18 billion in October from $4.08 billion in September and were up from $4.11 billion in October 2011.

Imports of petroleum and related products rose 0.7 per cent to $636 million last month from a year earlier. Imports of mechanical machinery fell 3.5 per cent to $497 million while imports of vehicles and parts gained 4.5 per cent to $454 million. Electrical machinery imports rose 11 per cent to $412 million.

China was the biggest source of imports last month, rising 10.5 per cent to $731 million, followed by goods from Australia, which fell 4 per cent to $626 million. The US was in third place, falling 3.1 per cent to $369 million.

Australia remained the biggest market for New Zealand products, with shipments falling 4.6 per cent to $912 million, while those from second-ranked China fell 6.4 per cent to $456 million, and from the US declined 8.7 per cent to $281 million.

ASB economist Jane Turner said the weakness in October's exports appeared to be a result of disruption in the timing of shipments of aluminium.

"Nonetheless, looking beyond this there appears to be some underlying trend decline in aluminium exports, as a result of lower production.

"In addition, dairy volumes have continued to ease - correcting to 'normal levels' as production enters a new season," she said.

Current conditions for exporters have generally been challenging, with easing global demand and a high kiwi dollar, she said.

"We expect to see some improvement in demand conditions over 2013, along with some recovery in commodity prices as the effects of the US drought start to flow through to meat and dairy prices.

"However, the NZD will remain a headwind on NZD returns."