NZ: Merchandise trade

Wed Aug 23 17:45:00 CDT 2017

Consensus Actual Previous Revised
Merchandise trade Balance - level NZ$-200M NZ$85M NZ$242M NZ$246M
Exports - Y/Y percent change 16.8% 11.0% 10.7%
Imports - Y/Y percent change 5.4% 7.7% 7.6%
Exports - M/M percent change 6.7% 3.3% 3.5%
Imports - M/M percent change 2.0% -3.0% -3.1%

New Zealand's merchandise trade balance surplus narrowed to NZ$85 million in July from NZ$242 million in June, contrary to the consensus forecast for a deficit of NZ$200 million. This is the first time New Zealand has recorded a trade surplus in July since 2012 and only the eleventh July surplus since 1960, with continued strong demand from China and higher dairy prices helping to boost export growth.

Exports rose 16.8 percent on the year in July, accelerating from growth of 10.7 percent in June. Exports of dairy products and total exports to China both rose 51 percent on the year in July, with the growth rate for dairy products the strongest since March 2014. Exports of other foodstuffs also recorded strong growth in July, as did exports of forestry products. In addition to China, exports to other Asian trading partners and the European Union also recorded double-digit growth on the year in July, outweighing more modest growth in exports to the United States and a small dip in exports to Australia. Using seasonally adjusted data, New Zealand's exports advanced 6.7 percent in July after an increase of 3.5 percent in June.

Imports of goods increased by 5.4 percent on the year in July, slowing from growth of 7.6 percent in June. This deceleration in headline imports growth was largely driven by weaker growth in capital goods imports. Transport equipment, in particular, saw a sharp drop in year-on-year growth in July, mainly reflecting the base effect of a large increase in this category of imports in July 2016. Abstracting from this factor, most other categories of imports recorded stronger year-on-year growth in July, with passenger car imports particularly strong. Using seasonally adjusted data, New Zealand's goods imports rose 2.0 percent on the month in July, rebounding from a drop of 3.1 percent in June.

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.