NZ: Merchandise trade

Wed Nov 25 15:45:00 CST 2015

Consensus Actual Previous Revised
Merchandise trade Balance - level NZ$-975M NZ$-983M NZ$-1.200M NZ$-1140M
Exports - M/M percent change 4.2% -0.5% -1.0%
Exports - Y/Y percent change -4.5% 2.0% 1.7%
Imports - M/M percent change -0.5% 2.6% 0.4%
Imports - Y/Y percent change -2.2% -1.3% -3.2%

The trade deficit widened to NZ$963 million in October 2015, compared with a deficit of NZ$892 million for the same period last year. Exports fell more than imports. Total goods exports fell to NZ$3.8 billion, down 4.5 percent from October 2014. Milk powder, butter, and cheese led the fall, down NZ$202 million from October 2014. Goods imports fell NZ$109 million (2.2 percent), led by falls in petrol and capital goods.

Goods exports to China rose NZ$57 million (9.2 percent), to move China ahead of Australia as the top annual export destination. The rise in exports to China this month was led by beef, milk powder and kiwifruit. Goods exports to Australia fell NZ$66 million (down 8.0 percent), driven by crude oil which fell NZ$60 million.

The rise and fall of dairy exports has been driven by demand from China, and is reflected in our total exports to China. China became the top export destination in November 2013, but fell below Australia from March to September 2015. However, China is now both our top export destination for goods, and our top source of imports. Although milk powder exported to China fell 65 percent for the year ended October 2015, it is still the largest commodity. Smaller exports such as beef and fruit have doubled in value in the past year.

The international trade balance measures the difference between imports and exports of both tangible goods and services. Imports may act as a drag on domestic growth and they may also increase competitive pressures on domestic producers. Exports boost domestic production. Trade balance values are calculated by deducting imports (cif) from exports (fob).

Changes in the level of imports and exports, along with the difference between the two (the trade balance) are a valuable gauge of economic trends here and abroad. While these trade figures can directly impact all financial markets, they primarily affect the value of the NZ dollar in the foreign exchange market. Imports indicate demand for foreign goods in New Zealand. Exports show the demand for NZ goods in countries overseas. The currency can be sensitive to changes in the trade deficit run by New Zealand since this trade imbalance creates greater demand for foreign currencies. The bond market is also sensitive to the risk of importing inflation.