New Zealand’s trade balance likely to deteriorate modestly over next year

New Zealand’s headline unadjusted monthly trade deficit came in slightly wider than expected in July at NZD 433 million. But a one-off import, valued at NZD 258 million stimulated values of import. Excluding this, New Zealand’s trade deficit came in at NZD 175 million in July. In seasonally adjusted terms, the country’s trade deficit broadened to NZD 218 million, the widest deficit since March. But it is quite within the ball-park of recent monthly results, said ANZ in a research report. In underlying trend terms, the overall scenario seems reasonable.

The values of export, in seasonally adjusted terms, were up 2.2 percent month-on-month in July. Looking at components, dairy exports rose 0.6 percent in sequential terms, and together with solid mechanical machinery and aluminium exports, this counters declines seen in meat, fruit and forestry exports, stated ANZ. Fruit exports in seasonally adjusted terms fell 16 percent month-on-month. However, the volume of fruit exports increased 5 percent year-on-year.

Values of import in seasonally adjusted terms increased 5.6 percent month-on-month, following two consecutive declines. Stripping petroleum products, values of import rose 6.3 percent month-on-month, with the major one-off import contributing. In terms of trend, values of import have been easing lately.

“We still believe the trade balance will deteriorate modestly over the next year or so. But with export prices stabilising (and some rising) and oil prices expected to remain in a broad $40-$50/bbl range, that deterioration now looks set to be far smaller than seemed likely a few months ago”, stated ANZ.

The terms of trade is just 6 percent off its highs. Even if the second quarter figures are expected to indicate a decent fall, the terms of trade is quite close to troughing, according to ANZ.