Trade gap balloon a gloomy portent
It was a red October for exporters, with overseas sales down on the same month last year almost across the board for both key markets and main products.
International prices for New Zealand's main exports are lower, and a high dollar - yesterday it was trading at US82.2 cents - is making the situation worse.
As a result, the trade deficit in October was larger than expected at $718 million because of weaker dairy exports and a slump in aluminium exports.
At the same time imports are steadily rising and are likely to grow further as rebuilding in Canterbury gathers steam.
All this contributed to the annual trade deficit ballooning to $1.37 billion, the first time that figure has topped $1b for three years.
And bank economists expect the trade figures to worsen. That would reflect lower commodity export volumes after last year's bumper grass growing season and little price gain because of a high currency.
The current account deficit was expected to widen from 4.9 per cent in the middle of this year to more than 6 per cent next year. A rising external deficit may eventually send alarm bells to international financial markets and credit-rating agencies.
Statistics New Zealand figures issued yesterday showed falling global prices for dairy products knocked a hole in exports last month, with the value of all goods sold overseas down 11 per cent, or $423 million, compared with October last year.
The high New Zealand dollar is undermining export earnings and encouraging more imports, ANZ economists say.
As well, the boost to dairy and meat production from a bumper grass-growing season in the past year is starting to fade.
Falling world prices for key commodities were masked earlier this year because of the exceptional grass growth, the BNZ said.
"This export volume growth has disappeared - [with] a seasonally adjusted 16.9 per cent fall in dairy products in October and 11.8 per cent drop in meat," BNZ economist Doug Steel said.
Westpac Bank economists said the trade figures had been "lumpy and jumpy" in recent months as dairy export stocks that had built up were cleared.
Dairy export volumes surged 20 per cent and 30 per cent in May and June, but then fell 10 per cent a month from August to October as volumes returned to more normal levels.
With the new season under way, dairy production is expected to be about 2 per cent higher, and prices are rising, especially for dairy because of drought in the United States, so export values should trend up from here, Westpac said.
But the trade deficit is still expected to widen as more construction machinery and equipment is imported for Canterbury's rebuilding.
Meanwhile, October imports were slightly higher than in the same month last year, rising just 1.7 per cent or $70m. There was a lift in capital goods.
October trade Total exports: $3.4 billion (down 11 per cent on October 2011) Total imports: $4.2 billion (up 2.5 per cent on 2011) Trade deficit: $718 million
The annual trade deficit widened to $1.36 billion, its worst level since September 2009.
Key export markets Australia: $912m (down 4.6 per cent from October 2011) China: $456m (down 6.4pc) United States : $281m (down 8.7pc) Japan: $201m (down 26pc) South Korea $111m (down 19pc)
Key export products Milk powder, butter, cheese: $813m (down 20pc from 2011) Meat, edible offal: $277m (down 6.6pc) Logs, wood: $294 (up 5pc) Crude oil: $132m (down 27pc) Aluminium $42m (down 60pc)