NZ: Pull back in merchandise trade - ANZ

After a very strong end to 2017 there was a pullback in January exports across all the main sectors of New Zealand, points out Con Williams, Agri Economist at ANZ. 

Key Quotes

“The trifecta of a higher NZD, lower commodity prices at end of 2017 and high volumes of exports over the last quarter of 2017 (weather induced and Chinese free-trade window) all conspiring together. The pace of imports remained brisk too with strength across most categories. This indicates the domestic economy has started 2018 in reasonable shape. This combination saw a larger than expected monthly deficit of $566m, which pushed the annual deficit back to -$3.2bn.”

• An unadjusted trade deficit of $566m was seen in January, which was well below market expectations. This pushed the annual trade deficit back to -$3.2bn, which is still in line with the average from 2017. The three-month balance actually narrowed a touch to -$1.2bn and seems to better reflect the sentiment of a strong export performance being offset by solid domestic economic activity/demand.
• Seasonally adjusted export values dropped 14.7% m/m. This was the mirror image of the December 14.1% m/m gain. Hard commodities underperformed with no oil exports during the month and aluminium down 48% m/m after a large gain in December. Fruit exports were back 31% m/m, which reflects the smaller volumes of the 2017 kiwifruit and pipfruit crops meaning an early finish to the selling season. There were also falls for dairy (-11.9% m/m), meat (-5.9% m/m) and seafood (-9.7% m/m) due to a high NZD, moderation in dairy prices and weather conditions. Log/lumber volumes dropped, but higher prices help to offset falls.
• Seasonally adjusted import volumes were largely unchanged (-0.3% m/m). Strength remains in capital good imports reflecting firm investing to overcome skilled labour shortages and to improve productivity. Intermediate good imports for the manufacturing and construction industries remain robust too. Crude oil imports remain weaker though and there was a drop in cars imports perhaps reflecting some ships being turned around due to biosecurity concerns.”