NZ: Merchandise trade

Mon Jan 29 15:45:00 CST 2018

Actual Previous Revised
Merchandise trade Balance - level NZ$640M NZ$-1193M NZ$-1233M
Exports - M/M percent change 13.0% -0.5% -0.7%
Exports - Y/Y percent change 25.7% 19.6% 19.0%
Imports - M/M percent change -4.5% 4.7% 5.0%
Imports - Y/Y percent change 11.2% 26.7% 27.1%

New Zealand's merchandise trade balance swung from a revised deficit of NZ$1,233 million in November to a surplus of NZ$640 in December. The large November deficit was largely driven by a one-off import of aircraft, while the December surplus is the largest ever recorded for that month and the largest monthly surplus since March 2015, with record-high dairy exports a major factor driving this result.

Exports grew 25.7 percent on the year in December, accelerating from 19.0 percent in November and the fastest growth in more than two years. Dairy exports increased by 30.3 percent on the year, with exports of meat, forestry products, and fruit also recording very strong growth. This strength in external demand was broad-based across all of New Zealand's major trading partners, including China, Australia, the United States, Japan and the European Union. Using seasonally adjusted data, New Zealand's exports rose 13.0 percent on the month in December after a decline of 0.7 percent in November, the strongest growth since April.

Imports of goods rose by 11.2 percent in December, slowing from growth of 27.1 percent in November. Imports in November were boosted by a one-off purchase of a large aircraft. Headline growth in December reflects a year-on-year increase of 21.1 percent in imports of mechanical machinery and equipment and 16.1 percent of imports of electrical machinery and equipment. Auto imports, however, were weak, down 3.9 percent on the year, while petroleum imports recorded modest growth of 1.3 percent. Using seasonally adjusted data, New Zealand's goods imports fell 4.5 percent on the month in December after an increase of 5.0 percent in November.

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.