Import rise widens deficit

By BRIAN FALLOW

New Zealand's trade figures turned a deeper shade of red last month.

Imports exceeded exports by $687 million in October, continuing the trend of widening deficits over the past seven months, Statistics New Zealand said.

The balance for the year ended October was a deficit of $893 million, compared with a deficit of $488 million for the year ended September and a surplus of $892 million in the year to October last year.

The deterioration reflected rising imports, underpinned by a resilient domestic economy, and falling exports, weighed down by weak commodity prices.

At $3.18 billion, imports were 5.6 per cent up on October last year but the increase is entirely explained by a jump in imports of aircraft. Six aircraft collectively worth more than $200 million were imported.

Exports are estimated at $2.49 billion, 8.7 per cent less than in October last year.

Over the same period, the New Zealand dollar appreciated 12.4 per cent on a trade-weighted basis, and 16 per cent against the US dollar.

ASB Bank's commodity price index is 11 per cent down on a year ago in NZ dollar terms, despite rising 9 per cent in US dollar terms.

Imports of plant equipment and Machinery were up 7.6 per cent on October last year, a hopeful sign considering the concerns of generally flat business investment over the past year.

Imports of consumer goods were unchanged on a year ago. In light of the exchange rate rise and modest world price inflation, that implied very solid growth in import volumes, Deutsche Bank economist Darren Gibbs said.

Car imports, recorded separately, were 15 per cent up on a year ago, likely to reflect more expensive cars arriving after higher frontal impact standards were introduced in April.

Looking ahead, the signs are that the trade gap will widen further.

The Reserve Bank's monetary policy statement last week projected deteriorating terms of trade for the year ahead, even though world prices for dairy products have recovered some lost ground in recent months.

The National Bank's business confidence survey this week recorded weaker expectations for export growth.

The Australian Treasury has cut its growth forecasts by 0.75 per cent in the year ahead because of the drought. Slower growth in Australia generally hurts New Zealand manufactured exporters.