NZ trade: Fruits of our labour - ANZ

Analysts at ANZ Bank New Zealand explained that for the second month in a row, the goods deficit hit a new record.

"Aside from the large import item (aircraft), the overall picture was largely as expected: exports ticked up on lifting volumes and NZD support; imports are broadly in a holding pattern. Strength in the horticultural sector was clearly evident in today’s release, with fruit achieving solid exports growth."

Key points

"The unadjusted monthly trade deficit widened $90m in September to $1,560m, despite our expectation for a narrowing. Both exports and imports surprised on the upside, with large items (aircraft) adding $275m to the import side and accounting for much of the surprise."

"On a seasonally adjusted basis, exports rose 9.2% m/m, with dairy up 9.7% m/m on higher volumes and prices (the weaker NZD is clearly doing its job here, but there are downside risk in the global market). The real winner was fruit, with values and volumes up 47.6% and 34.1% m/m respectively. Kiwifruit are a significant part of this story, with unadjusted values running at 18.5% y/y (gold up 31.1%) reflecting more vines coming into maturity alongside a ravenous global consumer." 

"Seasonally adjusted imports lifted a solid 11.6% m/m. However, the 6.4% fall in mechanical machinery and equipment is a tentative sign that investors are cautious at present. But these data are volatile. A rebound in petrol also boosted. Overall, imports ex-large items came in largely as expected: more or less in a holding pattern. While large items should boost business investment, the underlying picture is hardly one to get excited about."

"On a quarterly basis, the seasonally adjusted goods deficit narrowed $300m to $1.1bn – not enough to prevent a widening annual goods deficit in the upcoming Q3 Balance of Payments. However, quarterly export volumes are holding up, which should at least keep pace with imports growth in Q3."

"Despite recent slippage in world prices for some of our key exports, the annual deficit is expected to narrow over the year ahead, reflecting solid dairy volumes and NZD weakness. As always, however, much depends on the global situation, particularly China. And it’s fair to say things are looking a little more wobbly on that front."