September trade figures is a mixed bag of good and bad news. The good news is, the monthly trade defict narrowed, with dairy exports holding up. The bad news is, annual receipts from exports and trade volume are getting lighter. The trade deficit in September fell to $791 million, from $809 million in the previous month. The decline in the deficit was due to slow growth in imports and a steady increase in dairy export receipts. In the latest monthly trade statistics, export receipts totaled $3.3 billion, almost on par with the previous month, but 3.9% lower than September of the previous year. As the devil is usually in the detail, we find that lighter exports and import volumes have led to lower annual export receipts and a trade deficit of $888 million for the year to September 2012.
Falling international prices, particularly for dairy, and weaker demand overseas has affected the performance of the export sector in the previous months. As can be seen in the chart, growth in the annual merchandise export receipts had been deteriorating at a fast pace for months. In the year to September 2012, revenue gains from China (up $642 million) were offset by weaker sales in Australia (-3.4% or $359 million), India (-13.9% or $134 million), United Kingdom (-8.7% or $135 million) and Korea (-4.0% or $66 million). In terms of receipts from major exports, the annual gains in dairy export receipts (up 3.1%) were offset by losses in forestry and meat exports receipts (down 8.6% and 7.8%). The volume of meat and forestry exports have also declined in the year to September 2012. Compared the year to September 2011, the volume of timber and log exports fell 5.5% while meat export volumes have had negative growth since May 2009.
On the import side, there is also evidence of contraction. Less purchases of plant equipment, motor vehicle and crude oil contributed to the soft monthly and annual growth in imports. Purchases of transport equipment declined by 5.2% on the previous year level. Consumer imports were also flat, growing only 0.6% on the previous year level. Overall, annual import spending was up 1.1%. This is the weakest increase since a double-digit growth in the first quarter of 2012.
Although the annual trade deficit is well in line with expectations, it is still a deficit. Such shortfall tends to post a threat to the economy- particularly so, when spending in the domestic economy has stalled and when pump-priming to fuel the economy is an unlikely option. Over the short to medium term, external demand and exchange rate considerations will influence the prospects for a better trade performance.