Import-export gap pushes trade deficity to largest for six years

Exports totalled $4.2 billion last month. Photo / Brett Phibbs

Imports exceeded exports by $60 million or 1.4 per cent last month, pushing the annual trade deficit to $2.8 billion - the largest for six years.

The annual trade balance has been deteriorating since May last year.

Dairy exports last month were 29 per cent or $320 million lower than in June last year, but total exports at $4.2 billion were 1.3 per cent higher.

Excluding dairy products, exports were 12.3 per cent higher than in June last year - more than can be explained by a 10.5 per cent fall in the trade-weighted exchange rate.

Higher export earnings from forest products, meat and fruit offset 90 per cent of dairy's decline.

Comparing the June quarter with the same period last year, exports of dairy products were $1 billion down, and oil exports halved to $225 million.

But two-thirds of the decline in those two industries was offset by rises in other exports, aided by a 6.5 per cent fall in the trade-weighted exchange rate. Overall exports were down 3.3 per cent.

Meat exports in the June quarter were up 12 per cent on the same period last year, on similar volumes. Fruit exports were 27 per cent up, boosted by a 20 per cent rise in volumes shipped. Exports of forest products rose 5 per cent, despite a 2 per cent decline in volumes, and exports of manufactured goods were 5.2 per cent up.

"And this is only just beginning to reflect the recent weakening in the exchange rate. Just wait until the FX cover - typically higher among exporters than importers - rolls over," said Bank of New Zealand economist Craig Ebert.

On the inbound side, June quarter imports were almost unchanged (up 0.3 per cent) on the same quarter last year, despite the lower dollar pushing up the cost of imported goods.

A price-drive decline of 44 per cent in oil imports offset rises of 5 per cent in imports of plant and machinery, 8 per cent in consumer goods and 7 per cent in car imports.

Imports last month, at $4.3 billion, were 9 per cent higher than in June last year.

Infometrics economist Benje Patterson expects the trade balance to deteriorate further before stabilising next year.

"The short-run deterioration will be driven by higher import costs as a result of the weaker New Zealand dollar, as well as recent falls in dairy prices, which will push dairy export receipts lower," he said.

"However, by later in the year, exports are likely to pick up, as the lower dollar has boosted margins for manufacturers and other primary sector exporters.

"An eventual stabilisation of dairy prices and softening of import demand will also begin to help rein in the trade deficit."

Trade balance

$2.8b annual trade deficit, the largest for six years.

$60m more imports than exports in June.

$320m fall in dairy exports in June versus last year.