Exports down as whole milk powder shipments fall $379m last month.

New Zealand's trade accounts were in the red for the sixth month in a row in December, imports exceeding exports by $159 million or 3.6 per cent.

The imports side was swollen by $215 million of aircraft, thought to be an Air New Zealand Dreamliner.

December's shortfall pushed the full year's trade deficit out to $1.15 billion from $500 million for the year ended November 2014.

Compared with December 2013 exports at $4.4 billion were 6.9 per cent lower led by whole milk powder, exports of which fell $379 million or 35 per cent despite a 9.8 per cent increase in volumes shipped.

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Beef exports were up by $100 million or 63 per cent on a year earlier, which largely reflected better prices as beef volumes rose 21 per cent.

Excluding dairy products, exports were up 5.9 per cent on December 2013, even with an exchange rate 1 per cent higher on a trade-weighted basis.

"This is testimony to the general robustness in non-dairy commodity export prices and in many cases volumes, and what seems to be a good performance in non-commodity exports at the tail end of 2014," said Bank of New Zealand economist Craig Ebert.

On the inbound side, imports of consumer goods and cars were up 11.7 and 11.4 per cent respectively on December 2013, while imports of plant and machinery rose 16.2 per cent.

ASB economist Nathan Penny expects a largely flat trend in the trade balance over the first half of this year as lower oil prices balance otherwise growing import values and the last of the falls in dairy export prices.

"Later in 2015, we expect growing import demand, reflecting solid domestic activity, to lead to wider trade deficits," he said.

Big dry will take toll on growth - bank

Dry weather throughout much of New Zealand is likely to take a "significant chunk" out of GDP growth over the first and second quarters, say Westpac economists.

Fonterra yesterday said it had cut its milk volume forecast for the 2014-15 season by 3.3 per cent to 1532 million kilograms because of the effect of dry weather on production.

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The company's group director of co-operative affairs, Miles Hurrell, said daily milk production was 6.1 per cent lower than at the same time last season.

In some regions where pasture quality had declined markedly since mid-January, farmers were drying off cows early, and there also appeared to be a reduction in use of feed supplements, as the economics did not support their widespread use this season.

An analysis from Westpac economists said the full-season forecast of a 3.3 per cent drop did not fully convey the severity of the downturn.

"Production was already up 3.7 per cent on a year ago over the first seven months of the season, so Fonterra's forecast implies that production over the remaining five months will be down 13.4 per cent on last year," it said.

"Judging by ... previous events, the current drought is likely to take a significant chunk out of total GDP growth over the first half of this year - mostly in terms of lower exports, but with some impact on household spending and business investment as well."

Lower milk production in New Zealand was also likely to put upward pressure on global milk prices, although it was probably too late to make a significant difference to this season's farmgate milk price of $4.70 a kilogram.

But Westpac said its forecast of an about-average milk price of $6.20/kg for next season would need to be revised higher.

Latest GDP figures showed economic activity for the year ended last September was up 2.9 per cent.

The NZ Institute of Economic Research's latest quarterly survey of Business opinion this month, pointed to strong economic growth of 3 to 3.5 per cent continuing from the end of last year.

The numbers

• $159m imports exceeded exports in December.

• $1.15b full year's trade deficit.

• $379m or 35%, fall in whole milk powder exports.