NZ: Merchandise trade

December 20, 2016 03:45 CST

Actual Previous Revised
Merchandise trade Balance - level NZ$-705M NZ$-846M NZ$-815M
Exports - M/M percent change -11.7% 9.3% 9.3%
Exports - Y/Y percent change -5.4% 8.1% 2.5%
Imports - M/M percent change -9.0% 2.1% 1.5%
Imports - Y/Y percent change -6.4% 5.7% 0.1%

New Zealand's merchandise trade balance deficit narrowed to NZ$705 million in November from a revised NZ$815 million in October (previously estimated at NZ$846 million). Exports fell by 11.7 percent (seasonally adjusted) on the month and by 5.4 percent year-on-year. Imports fell by 9.0 percent on the month (seasonally adjusted) and by 6.4 percent year-on-year.

The drop in exports in November was mainly driven by large declines in meat exports. The value of beef exports fell by 21 percent year-on-year, with volumes down 31 percent, while the value of lamb exports fell 27 percent year-on-year, with volumes down 23 percent. This was partly offset by in an increase in exports of milk and cream, up 19 percent year-on-year in value terms and 27 percent in volumes. New Zealand's exports of goods to the European Union and the United States decreased 32 percent and 23 percent year-on-year respectively, outweighing modest changes in exports to Australia, China and Japan.

Lower headline imports growth was mainly driven by the aircrafts and parts component, which recorded a large increase in October that was then largely reversed in November. Excluding these items, imports slid by only 0.1 percent year-on-year in November. Other components of imports were mixed, with big year-on-year increases in crude oil (up 29 percent) and passenger motor cars (up 23 percent) offset by falls in consumption goods (minus 2.6 percent) and machinery and plant (minus 5.3 percent).

Officials also noted the impact of November's earthquake on trade at one of New Zealand's major ports in the capital, Wellington. The value of exports through this port was 57 percent below November 2016 levels and 47 percent below November 2014 levels. The value of imports was 20 percent above November 2015 levels but 25 percent below November 2014 levels. Exports through this port accounted for 1.6 percent of New Zealand's total maritime exports in November, down from an average of 2.7 percent in the five previous November months, while imports accounted for 4.0 percent of the maritime total, down from an average of 5.3 percent for the previous five November months.

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.