New Zealand recorded its biggest trade deficit in 10 months in July, driven by a jump in imports of crude oil and helicopters while exports fell.

The merchandise trade gap was $774 million last month, for an annual deficit of $1.69 billion, according to Statistics New Zealand. Economists had expected a trade surplus of $50 million in July for an annual deficit of $830 million.

New Zealand's trade balance typically turns to a deficit in July, reflecting seasonal lows in primary produce exports, though there were small surpluses in July 2011 and 2012. The monthly numbers can jump around because of one-off shipments, such as a $152 million jump in helicopter imports in the latest month from a year earlier.

"It's likely that this monthly volatility largely reflects the timing of shipments," said Westpac Bank economist Michael Gordon in a note. "We expect volatility in the trade figures to continue for the next few months as a number of large movements (think drought and large swings in currencies) throw the balance around."


ASB Bank economist Christina Leung said the larger than expected trade deficit for the July month largely reflected higher than expected imports.

"While we had expected an improvement in domestic demand would drive a recovery in imports, the increase has been much greater than expected, with a rebound in consumption and capital goods imports. This is in line with recent consumer and business confidence surveys pointing to a recovery in consumption and business investment over the coming year," she said.

"Although total exports declined in July, there was an increase in dairy and meat exports. Higher global dairy and meat prices in the wake of tighter supply should underpin export values over the coming months, although there may be some offset in the near term from lower dairy export volumes after the Fonterra whey contamination scare. Over the medium term, we expect China's expanding middle class will continue to underpin strong demand for NZ commodity food exports," said Leung.

She said she continued to expect the Reserve Bank to keep the OCR on hold until March next year, given the continued low inflation environment "but signs of rising housing market pressures and the Canterbury rebuild gaining momentum."

Imports in July rose 17 per cent from a year earlier to $4.62 billion, beating the $3.95 billion estimate in a Reuters survey and were a record for a month of July.

Exports of $3.85 billion trailed the forecast of $3.92 billion, reflecting a 64 per cent decline in crude oil exports and a 13 per cent decline in milk powder, butter and cheese. Exports of aluminium and fruit also fell, while logs and meat gained.

Imports from China climbed 23 per cent to $833 million in the latest month from July last year, reflecting shipment of tunnelling equipment and railway goods wagons, while imports from Australia fell 22 per cent to $564 million on a drop in crude oil and raw cane sugar.

Exports to Australia, New Zealand's biggest market, fell 14 per cent to $760 million on a drop in crude oil sent to New Zealand's nearest neighbour. Shipments to China rose 22 per cent to $653 million, led by sheep meat and logs, while the US took 14 per cent less at $309 million, beef and milk constituents.