New Zealand: Trade Deficit Larger than Expected in January

Fundamental analysis of Forex market

The trade deficit was larger than expected in January, with exports slowing while imports held up.

NZ merchandise trade, January 2019

  • Balance: -$914m (Westpac f/c: -$500m, Market: -$300m)
  • Exports: $4,403m (Westpac: $4,600m, Market: $4,800m)
  • Imports: $5,317m (Westpac: $5,100m, Market: $5,000m)
  • Annual balance: -$6,358m (last: -$6,106m)

New Zealand’s trade deficit for January was much larger than expected, reaching close to a billion dollars. There was also an unusually large $158m downward revision to the December surplus. The annual deficit is now at its widest since October 2006.

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Most of the surprise was due to weaker exports, which were down 7.8% in seasonally adjusted terms. Commodity exports performed largely as we expected, with gains in dairy and wood products against a fall in meat exports. Rather, the weakness appears to have been in manufactured goods, though this is a fairly diverse category and there is no standout factor behind the decline.

Imports were largely in line with our forecast, except for the purchase of a large plane worth around $200m (we expected this to be recorded in the February figures). Oil import volumes remained high in January, and the prices paid have yet to fully reflect the plunge in world oil prices in recent months. On a more positive note, imports of capital equipment rose strongly for the month.

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