NZ: Larger than expected merchandise trade deficit - Westpac

Analysts at Westpac, note that New Zealand’s merchandise trade deficit for November was much larger than expected and exports were broadly in line with their forecast, but there was a surge in imports for the third month in a row.

Key Quotes

“Exports rose to $4,629m in November, which was roughly flat in seasonally adjusted terms. Dairy exports dipped, but meat, logs and machinery had strong gains.”

“Imports rose to $5,823m, the biggest month in history by a wide margin. There was another large plane import (worth $263m) that we didn't include in our forecast, but that explains only part of the surprise. There was also a surge in imports of plant and machinery, reaching a new record high in seasonally adjusted terms.”

“Higher capital imports add to the trade deficit in the near term, but they also add to the economy's growth potential. And the fact that capital imports have risen for the last three months makes it harder to dismiss this as a blip. That said, we still expect business investment to slow over the next year, due to uncertainty around the new government.”

“The New Zealand dollar fell 20pts to 0.6970. While there were three data releases at the same time (these two, plus net migration), the surprisingly large monthly trade deficit was the most likely cause.”