New Zealand trade balance misses expectations in November

New Zealand trade balance came in worse than expected in November. The trade balance came in a deficit of NZD 705 million. The annual deficit narrowed slightly to NZD 3.18 billion; however it has been broadly in a holding pattern since July. Exports dropped 11.7 percent in sequential terms on a seasonally adjusted basis, reversing the strength witnessed in October. Exports of meat declined 32 percent year-on-year.

Meanwhile, imports fell 9 percent sequentially. Crude oil imports grew 26 percent in sequential terms following a 41 percent fall in October. Households continued to spend huge on cars, with annual import growth of 23 percent.

The key for net trade outlook for the next year is the relative movement of international commodity prices and the NZD/USD, said ANZ. A stronger USD might cap the cyclical upturn in weak commodities in 2017 by lowering Chinese/emerging market purchasing power. However, a weaker NZD/USD might give a significant offset for local exporter returns. The NZD TWI is expected to fare better because of GDP and euro weakness, so it might depend on market and product mix, stated ANZ.

A continuation of lower livestock volumes countered by stronger other exports might continue for the first half of 2017. Horticultural volumes growth is expected to decelerate mid-year because of smaller crops. Manufacturing is experiencing a cyclical upward swing, but local activity seems more domestic focused. On the import side, across-the-board domestic market strength and possibly higher oil prices due to courtesy of global supply cuts implies certain rise in import values.