Trade deficit narrows in July

Cheaper oil contributes to 10pc drop in imports while exports take smaller dip

New Zealand’s merchandise trade deficit narrowed in July from the same month last year as imports such as crude oil fell faster than exports such as milk powder and meat.

The trade deficit was $433 million last month, from a surplus of $110m in June and from a deficit of $730m in July 2015, Statistics New Zealand said. The annual trade gap narrowed to $3.03 billion from $3.3b in the 12 months to June 30. A monthly deficit of $350m and an annual gap of $2.98b was expected, based on a Reuters survey.

Falling crude oil prices contributed to a 10 per cent decline in imports to $4.4b in July from a year earlier, accounting for more than one-third of the $503m decline. The drop reflected a decline in global crude oil prices and in the volume imported, Statistics New Zealand said.

Brent crude dropped as low as US$27.88 a barrel in January and had recovered to US$50.35 a barrel by the start of July, down from about US$62 a barrel a year earlier.

Global crude prices also had a bearing on New Zealand’s dairy exports, with energy exportdependent Algeria recording the biggest decline in shipments of New Zealand dairy products last month; down 55 per cent by value and 45 per cent by quantity. Algeria is the thirdbiggest market for NZ milk powder.

Meat and edible offal exports fell by 19 per cent, or $97m.

“The meat export falls this month are partly due to record meat exports this time last year,” said international statistics senior manager Jason Attewell. “Meat values in July 2015, off the back of a record high meat season, were 31 per cent higher than the average value for the previous five July months.”

Exports of fruit fell 5.7 per cent by value but rose 3.9 per cent by volume last month.

China remained New Zealand’s largest market in the 12 months ended July 31, taking a total $9.1b, up 3.6 per cent from a year earlier.

China was also the largest source of imports, sending $10.5b of goods to New Zealand in the latest year, up 10 per cent, resulting in a $1.4b bilateral trade deficit for New Zealand.

New Zealand’s exports of dairy products fell 8 per cent to $11.1b in the latest year, while meat exports rose 0.5 per cent to $6.5b.