NZ: Merchandise trade

July 25, 2017 05:45 CDT

Consensus Actual Previous Revised
Merchandise trade Balance - level NZ$200M NZ$242M NZ$103M NZ$74M
Exports - Y/Y percent change 11.0% 8.7% 7.9%
Imports - Y/Y percent change 7.7% 15.0% 14.9%
Exports - M/M percent change 3.3% -6.6% -6.8%
Imports - M/M percent change -3.0% 1.1% 1.0%

New Zealand's merchandise trade balance surplus widened to NZ$242 million in June from a revised NZ$74 million in May, above the consensus forecast for a surplus of NZ$200 million. This is the largest June surplus since 2013, with continued Chinese demand for dairy exports a major factor behind the increase in the surplus. Car imports also rose strongly in June.

Exports rose 11.0 percent on the year in June after an increase of 7.9 percent in May. Dairy exports again made the largest contribution to headline growth, up 45 percent on the year on the back of very strong demand from China. Exports of meat and forestry products also continued to post solid growth in June, partly offset by year-on-year declines in fruit and crude oil exports. Total exports to China rose 26 percent on the year in June, with exports to Australia, the United States, Japan and the European Union recording relatively small increases. Using seasonally adjusted data, New Zealand's exports rose 3.3 percent in June after dropping 6.8 percent in May.

Imports of goods increased by 7.7 percent on the year in June, slowing from growth of 14.9 percent in May. This deceleration in headline imports growth was largely driven by imports of crude oil, which fell by 18 percent on the year in June after increasing by 65 percent in May. This resulted in growth in intermediate imports falling from around 25 percent in May to 5.4 percent in June. Imports of consumption goods were also weaker in June, down 1.2 percent on the year after a solid increase in May, while imports of capital goods rose 12 percent on the year in June after a decline in May. Imports of cars rose 31 percent on the year in June to a new record monthly level of NZ$505 million. Using seasonally adjusted data, New Zealand's goods imports fell 3.0 percent on the month in June after advancing 1.0 percent in May.

Using seasonally adjusted data, New Zealand recorded a quarterly trade deficit of NZ$479 million in the three months to June, the thirteenth consecutive quarterly deficit but down sharply from the NZ$1.3 billion deficit recorded in the three months to March. Goods exports rose 9.9 percent on the quarter, again mainly reflecting strong performance by dairy exports, while goods imports rose 2.9 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.