Imports far outweighed exports for October, taking the annual trade deficit to $5.8 billion, its largest deficit since October 2007.
With exports dipping 6.4% month on month, imports cost more from a combination of a then low New Zealand dollar and increased imported fuel costs.
October this year marked the 10-year anniversary of the New Zealand-China free trade agreement, with Chinese imported goods up by a record $430 million, reaching $1.5 B in October.
Statistics New Zealand international statistics manager Tehseen Islam said that on an annual basis, imports from China were now twice the value they were in the October 2008 year, while exports in the decade had more than quadrupled.
“Two-way goods trade with China is continuing to strengthen,” Islam said.
New Zealand's increasing reliance on China trade comes at a tense time, with China-US relations strained over ballooning tit-for-tat trade tariffs, plus the respective expectations of the economic giants on their smaller trading partners.
The October trade deficit was much larger than expected by analysts and the market. The total goods exported for the year ended October was $57.2 B, while total goods imported for the same period was $63 B - a $5.8 B deficit.
The monthly trade deficit for October month was $1.3 billion, with total goods exported at $4.9 B and total goods imported at $6.2 B.
ASB senior rural economist Nathan Penny said the $1.3 B October deficit was larger than expected, with the market having picked $850 million and ASB $700 M.
“Strong import demand contrasts with weak business sentiment. From here we expect a modest reduction in the trade deficit as agricultural production and export volumes lift,” Penny.
Westpac senior economist Astasia Ranchhod noted the $1.3 B deficit was higher than expected, crediting the result to the weak kiwi and rising fuel costs. For the year to October, the cost of New Zealand's imports had risen above $6 B for the first time.
“While that was in part due to rises in the cost of fuel imports, it also reflects some positive trends in domestic activity,” Ranchhod said.
Firmness in demand had encouraged increased investment spending by businesses, with machinery imports up 7.5%, transport equipment up 10% and “solid growth” in imports of consumer goods, up 11%.
Islam said China as NZ's largest trading partner was a key supplier of goods such as cell phones and computers. In the past decade, annual cell phone imports from China were up by $644 M to $781 M, while computer imports rose by $479 M to $955 M.
Conversely, China was a big export market for dairy products, wood, and meat, with exports there up by $242 M to $1.2 B when compared October last year.
Over the same decade, annual goods exports to China increased $11.2 B to reach $13.5 B for the year ended October.
Milk powder, butter, and cheese led this rise up $3.7 B, with milk powder alone up $2.1 B, while logs, wood, and wood articles were up $2.6 B and meat and edible offal was up $1.8 B; being key contributors to the exports rise.
*Simon Hartley is senior business reporter and assistant chief reporter for the Otago Daily Times.