Unexpectedly large trade deficit in Sept, dairy exports weak

Picture / Greg Bowker

New Zealand's trade deficit widened unexpectedly last month as dairy exports declined and imports remained stronger than anticipated.

Statistics New Zealand said the trade deficit widened to $1.22 billion in September, from $1.08 billion in August, larger than the $825 million deficit forecast by economists. That compares with a $1.36 billion deficit in September last year.

The country's exports rose 2 percent to $3.69 billion in September, lagging behind the $3.9 billion expected by economists.

Shipments of meat and edible offal rose 33 percent to $438 million from the year earlier, led by frozen beef, which gained 69 percent due to higher prices, helping the 2014/15 beef export season reach a record $3.2 billion, the agency said.

Offsetting that, exports of milk powder, butter and cheese fell 32 percent to $4.91 billion from the year earlier month, led by a 32 percent decline in whole milk powder. The quantity of whole milk powder fell 11 percent from the same month a year earlier.

Meanwhile, New Zealand imports in September fell 1.3 percent to $4.91 billion, still ahead of the $4.78 billion expected. Imports of capital goods fell 17 percent with transport equipment down 55 percent, led by a reduction in aircraft imports. However, underlying imports were strong. Excluding large capital items, September imports rose 8.1 percent to a record, the agency said.

"The trade balance was weaker than expected, largely due to lower exports," ASB senior economist Jane Turner said in a note. "Much of the weakness was due to a decline in dairy exports. Weak dairy production and export volumes highlight the direct drag this sector will have on the New Zealand economy."

The New Zealand dollar fell as low as 67.53 US cents, from 67.82 cents immediately prior to the 10.45am release. It recently traded at 67.71 cents.
In the year through September, the annual deficit was $3.24 billion, larger than the $2.85 billion deficit expected by economists.

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