The October trade deficit declined from $775 million in the previous month to $718 million in October 2012, but remains well above the $226 million deficit in the same month in the previous year. The annual deficit has ballooned to $1.37 billion, from a deficit of $874 million a year ago.
The deficit came as the annual value of exports dropped by 1.4%. This decline was broad-based, but driven by falls in revenue from meat, forestry, minerals (particularly aluminium), petroleum and cereal products. Compared to other major exports, the value of dairy exports was up from last year. However, despite increasing dairy volumes, the latest months have seen dairy export receipts dip below year-earlier levels.
On the other side of the equation, the value of imports was up on a monthly basis, but declined 0.6% in the year to October. Declines in transport equipment and intermediate goods and slower growth in fuel imports drove the decline in annual imports. In contrast, annual consumer imports and motor vehicles were up from year-earlier levels. This growth suggests an improvement in domestic demand over the past year.
Overall, the growth in annual imports had been in the single digits since the first quarter of the year. This decline in imports recorded in the latest month is the first since October 2010.
We expect that the monthly trade deficit would rise even higher in coming months due to Christchurch rebuild related imports. Exports are also likely to face the challenges of a strong New Zealand dollar and uncertain world demand. These influences lead us to forecast an ongoing deterioration in the nation’s external accounts through next year.