27 Nov 2014

Highest October trade deficit in 6 years

4:17 pm on 27 November 2014

New Zealand recorded a $908 million trade deficit in October, the highest for an October month since 2008.

The deficit reflected a 5.1 percent drop in exports and a 12 percent rise in imports.

fonterra  milk powder packaging plant

Milk powder exports to China dropped 67 percent. Photo: PHOTO NZ

Exports to China led the decline, with the value of milk powder exports falling $459 million, or 77 percent, compared with the same month a year earlier. The quantity of milk powder exports to China fell 67 percent.

The $525 million increase in imports in the month was led by aircraft, helicopters and goods vehicles, Statistics New Zealand said today.

The trade balance for the year ended in October was a $107 million deficit, down from a trade surplus of $1.8 billion in the year ended August.

Westpac economist Michael Gordon said the monthly deficit was higher than expected.

"Quite notable was the larger import bill, and it does tend to be a bit of a double-edged sword. On the face value, it does worsen our overseas trade balance. But I guess a lot of the surprise seemed to be related to a pick-up in consumer and intermediate goods," he said.

"That is maybe a sign that domestic demand is starting to get a fresh lease of life in the last few months."

Foreign exchange adviser Derek Rankin said the slowdown in trade with China comes after enormous growth in exports to the world's second largest economy.

Mr Rankin, a director at Rankin Treasury, says the higher-than-expected trade deficit of $908 million was also because the world economy generally is failing to fire.

"We've got a slowdown going on everywhere and it's no surprise that some of these numbers would be impacting on us."

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