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27 Nov 2014
NZ trade deficit likely to deteriorate further - ANZ
FXStreet (Bali) - Today’s weaker than expected trade deficit in New Zealand was due to weaker export backdrop, notes Mark Smith, Senior Economist at ANZ, adding that a solid domestic backdrop and further falls to commodity export prices are likely to contribute to further deterioration in the trade picture.
Key Quotes
"Today’s weaker than expected trade deficit was the consequence of a weaker export backdrop, with the broader strength of imports suggesting domestic demand remains reasonably solid. The high NZD, solid domestic demand and the lagged effect of falls to commodity export prices signals the return to annual trade deficits over the next few months."
"The October trade deficit of $908m was larger than the median market expectation of a $642m deficit, but closer to our -$800m pick. The annual trade balance moved into a $107m deficit, the first annual trade deficit for 2014. Our seasonally adjusted estimates revealed a $388m deficit, with the three-monthly trade deficit at $857m, the fifth consecutive monthly deficit."
"Export values rose 3.8% sa, with export values up 1.9% in the three months to October. Forestry exports rose 33% sa, boosted by higher export volumes. Dairy export values were down 6.8% sa (-7.4% 3m/3m) with falls driven by lower prices and export quantities. Rising meat exports (up 0.5% sa, and up 7.6% 3m/3m) were a reminder that not all export commodity prices are falling. Oil export values fell 15% sa, largely reflecting lower volumes, with non-primary manufacturing values up 0.9% sa (+3.6% 3m/3m). Given recent commodity price falls, there is further downside for export values over the next few months, particularly for dairy exports."
"Import values fell 4%, which followed the 15% aircraft assisted September increase. Consistent with recent falls in oil prices was a 5.5% sa drop in oil import values, which were 24% lower than a year ago. Lower import prices are likely to provide impetus to domestic spending. Capital goods spending fell 22% but was up 18% ex-aircraft, with capital goods spending up more than a third on a year ago. Lifts for intermediate, consumption imports also suggest that a solid domestic demand backdrop remains in place."
"A solid domestic backdrop and further falls to commodity export prices are likely to contribute to further deterioration in the trade picture. Despite being below July peaks, gains in the NZD are a reminder that the NZ economy remains sound under the bonnet. Despite this, however, the high NZD continues to exert a restrictive influence on the NZ export sector and wider economy, with the RBNZ likely to keep pending OCR hikes on ice until the end of next year.'
Key Quotes
"Today’s weaker than expected trade deficit was the consequence of a weaker export backdrop, with the broader strength of imports suggesting domestic demand remains reasonably solid. The high NZD, solid domestic demand and the lagged effect of falls to commodity export prices signals the return to annual trade deficits over the next few months."
"The October trade deficit of $908m was larger than the median market expectation of a $642m deficit, but closer to our -$800m pick. The annual trade balance moved into a $107m deficit, the first annual trade deficit for 2014. Our seasonally adjusted estimates revealed a $388m deficit, with the three-monthly trade deficit at $857m, the fifth consecutive monthly deficit."
"Export values rose 3.8% sa, with export values up 1.9% in the three months to October. Forestry exports rose 33% sa, boosted by higher export volumes. Dairy export values were down 6.8% sa (-7.4% 3m/3m) with falls driven by lower prices and export quantities. Rising meat exports (up 0.5% sa, and up 7.6% 3m/3m) were a reminder that not all export commodity prices are falling. Oil export values fell 15% sa, largely reflecting lower volumes, with non-primary manufacturing values up 0.9% sa (+3.6% 3m/3m). Given recent commodity price falls, there is further downside for export values over the next few months, particularly for dairy exports."
"Import values fell 4%, which followed the 15% aircraft assisted September increase. Consistent with recent falls in oil prices was a 5.5% sa drop in oil import values, which were 24% lower than a year ago. Lower import prices are likely to provide impetus to domestic spending. Capital goods spending fell 22% but was up 18% ex-aircraft, with capital goods spending up more than a third on a year ago. Lifts for intermediate, consumption imports also suggest that a solid domestic demand backdrop remains in place."
"A solid domestic backdrop and further falls to commodity export prices are likely to contribute to further deterioration in the trade picture. Despite being below July peaks, gains in the NZD are a reminder that the NZ economy remains sound under the bonnet. Despite this, however, the high NZD continues to exert a restrictive influence on the NZ export sector and wider economy, with the RBNZ likely to keep pending OCR hikes on ice until the end of next year.'