November 28, 2013

New Zealand's booming dairy exports reduce trade deficit

Fuelled by booming dairy exports, especially to China, New Zealand has experienced its lowest October trade deficit since the early 1990s.

In October, there was a shortfall between exports and imports of just US$137 million, according to Statistics New Zealand. It represents a more positive figure than the US$286 million shortfall which economists had expected. New Zealand usually runs a trade deficit in October.

High export returns for the month were led by surging dairy product prices and volumes compared with a year ago, with a good start to the new season.

Production had rebounded from last summer's drought and world dairy prices were high, so exports were expected to remain strong in coming months, economists said. However, the high New Zealand dollar, especially against the Australian currency, remains a strong headwind for exporters outside the key commodities such as dairy.

The annual trade deficit was US$817 million, equal to 2.1% of exports, narrowing from US$1.2 billion for the September year.

In October, the value of exported goods rose 23% to US$640 million to US$3.4 billion compared with October 2012. This rise was due to milk powder, butter, and cheese, up US$564 million, while quantities increased 22% in October 2013, compared with the same month last year.

The value of imported goods rose 5.7% to US$194 million to US$3.6 billion, compared with the same month last year.

Exports to China alone topped US$817 million in October, led by whole milk powder and line logs. The country becomes New Zealand's top export market in the month and quarter, ahead of Australia.

On an annual basis, Australia is still the main export market, worth US$7.5 billion, but only just in front of China and looks set to lose the position soon. Exports to Australia in October were worth US$648 million, down US$96.4 million due to the slump in crude oil exports.

After removing seasonal effects, the value of exported goods in October 2013 fell 8.2% compared with September 2013. Seasonally adjusted imports for October 2013 rose 0.1% compared with September 2013.