NZ: Merchandise trade

October 26, 2016 04:45 CDT

Consensus Actual Previous Revised
Merchandise trade Balance - level NZ$-1125M NZ$-1436M NZ$-1265M NZ$-1243M
Exports - Y/Y percent change -3.4% -5.7% -8.7% -8.9%
Imports - Y/Y percent change -3.5% 1.8% -3.1% -3.7%
Exports - M/M percent change 2.6% -14.6% -14.8%
Imports - M/M percent change 6.0% 7.8% 7.1%

New Zealand's merchandise trade balance moved further into deficit in September, widening to a record level of minus NZ$1436M from minus NZ$1243M in August (revised from minus NZ1265M). The consensus forecast was for the deficit to narrow to minus NZ$1125. This is the third consecutive monthly deficit, resulting in a seasonally adjusted quarterly trade balance of minus NZ$1.1 billion, compared with minus NZ$253 in the three months to June.

Exports rose 2.6 percent on the month in September, and fell 5.7 percent year-on-year, compared with the consensus forecast for a fall of 3.4 percent. This year-on-year decline in exports was mainly driven by lower exports of beef (down 35 percent) and lamb (down 39 percent), partly reflecting the base effects of strong exports of these goods last year. Exports of dairy products were also down in year-on-year terms. Exports to China were around 13 percent higher year-on-year in September, but exports were down by around 6 percent to Australia and the European Union and by around 19 percent to the United States and Japan.

Imports rose 6.0 percent on the month in September and by 1.8 percent year-on-year, compared with the forecast for a fall of 3.5 percent. Excluding the impact of high-value goods, such as aircraft, imports fell 0.8 percent year-on-year. Crude oil imports rose 18 percent year-on-year in September, with a 23 percent increase in imports of passenger motor cars also making a significant contribution to the headline number.

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.