New Zealand increased its trade activity at the start of 2018, with imports and exports both reaching new highs for a January month.
Goods exports jumped 9.5 percent to $4.31 billion compared with January last year, while imports surged 17 percent to $4.88 billion, resulting in a trade deficit of $566 million, wider than the $227 million deficit in January last year and the largest for the month since 2007, Statistics New Zealand said.
The latest data is a big swing from December when the country recorded a trade surplus of $596 million, the largest ever for a December month. Economists had been expecting exports and imports to cancel each other out in January for a net trade balance of zero, and the kiwi dollar weakened slightly following the data to 72.97 US cents, from 73.14 cents immediately before the release.
"Both imports and exports reached new highs for January months," Stats NZ international statistics manager Tehseen Islam said. "Import growth remains strong while export growth didn't carry on at the same rate as the record-setting December 2017 month."
Imports increased across a range of commodities including turbo-jets, diesel, and ships, the statistics agency said. Imports of mechanical machinery and equipment jumped 23 percent to $700 million, lifting it ahead of the $659 million value of vehicles, parts and accessories, and elevating it to the largest import commodity group for the month. Imports of petroleum and products jumped 19 percent to $560 million.
Meanwhile, the rise in exports was led by milk powder, butter, and cheese, the country's largest commodity export, which increased 8 percent to $1.37 billion.
Dairy exports were driven by increased demand for milk powder from Algeria and Peru, and demand for butter in Iran. The value of dairy exports to China fell $21 million, marking the first decline since November 2016, due to lower exports of milk powder, Stats NZ said.
The value of meat and edible offal exports jumped 17 percent to $689 million, while exports of logs, wood and wood articles surged 26 percent to $292 million. Fruit exports fell 12 percent to $85 million.
The annual trade deficit for the year ended January was $3.22 billion, compared with a $2.88 billion shortfall in December and a $3.37 billion deficit in January last year. Annual goods imports were valued at $57.19 billion, ahead of the $51.9 billion a year earlier, while annual exports increased to $53.97 billion from $48.53 billion.
"We expect some of this weakness will prove temporary, and that the annual trade balance will narrow over the remainder of the year," economists at ASB Bank said in a note.
ASB said weakness in dairy and fruit values reflect normal monthly volatility and were likely to be temporary.
"On top of that, increasing agricultural production should boost export volumes over the remainder of the year," ASB said. "At the same time, import values are likely to remain firm on the back of similarly firm domestic demand."