NZ: Merchandise trade

Sun Jan 29 15:45:00 CST 2017

Actual Previous Revised
Merchandise trade Balance - level NZ$-41M NZ$-705M NZ$-746M
Exports - Y/Y percent change -0.9% -5.4% -5.5%
Imports - Y/Y percent change -0.9% -6.4% -5.6%
Exports - M/M percent change 9.1% -11.7% -12.0%
Imports - M/M percent change 3.9% -9.0% -8.5%

New Zealand's merchandise trade balance deficit narrowed to NZ$41 million in December from a revised NZ$746 million in November (previously estimated at NZ$705 million). This is the smallest of the six consecutive trade deficits reported in recent months and results in an annual trade deficit of NZ$3.2 billion, down from an annual deficit of NZ$3.5 billion in 2015.

The smaller trade deficit in December partly reflected a smaller year-on-year decline in exports, down 0.9 percent in December after a fall of 5.5 percent in November. Exports also rebounded strongly in seasonally-adjusted month-on-month terms, up 9.1 percent in December after a drop of 12.0 percent in November. Meat exports reported stronger (though still negative) year-on-year growth in values in December, while dairy exports reported weaker (but still positive) year-on-year growth. New Zealand's exports to China and Japan were up in year-on-year terms, offsetting declines in exports to Australia, the United States and the European Union.

Imports also fell by 0.9 percent year-on-year in December, after dropping by 5.6 percent in November. In seasonally adjusted terms, imports rose 3.9 percent on the month, rebounding from a fall of 8.5 percent in November. This mainly reflected lower imports of intermediate goods, with little change in the value of imports of capital and consumption goods.

Trade flows in December were impacted by damage to a major port in Wellington caused by November's earthquake. The value of exports through this port in December was down around 90 percent on December 2015 and December 2014 levels, while the value of imports was down around 40-50 percent.

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.