Falling dairy prices hit trade deficit
The trade deficit in October was larger than expected at $718 million because of weaker exports.
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 $423m, lower than October last year.
The drop saw the trade deficit hit $718m for the month, worse than the $450m economists expected. The deficit in October last year was only $226m.
The annual trade deficit has widened to $1.36 billion, its worst level since September 2009.
The high New Zealand dollar is undermining export earnings and encouraging more imports, ANZ economists said.
Almost half the fall in export values in October compared with the same month last year was due to the drop in dairy product values, despite a rise in actual volumes sold, Statistics NZ said. There were also lower exports of aluminium, mainly because of shipment timing issues, as well as a fall in volumes of meat exports.
Aluminium export volumes were down 50 per cent in October, after a 9 per cent drop in September. The Tiwai Point aluminium smelter cut back production earlier in the year when wholesale power prices were high.
October imports were slightly higher than the same month last year, rising just 1.7 per cent or $70m.
Seasonally adjusted exports in October fell 14 per cent compared with September this year.
There was a large fall in milk powder, butter, and cheese exports, following big drops in August and September.
The trend in export values had flattened out in the past few months, though ANZ economists expected an improving commodity price outlook.
Auction prices for the GlobalDairy Trade auction website were up almost a quarter since the middle of July.
Seasonally adjusted imports fell 8.0 per cent in October 2012.
The trend for exports remains at a high level, but is 6.3 per cent lower than its peak of November 2011. The trend for imports has shown little change in recent months, and is now 7.0 per cent lower than its record high of September 2008, Statistics NZ said.