BEIJING: “The value of whole milk powder sent to China in April 2015 was a fifth of the April 2014 value,” Statistics NZ international statistics manager Jason Attewell said.
“The value of whole milk powder sent to China in April 2015 was a fifth of the April 2014 value,” Statistics NZ international statistics manager Jason Attewell said.
Plunging dairy exports, especially to China, are expected to see New Zealand’s $2.6 billion annual trade deficit widen in coming months, after hitting its worst levels in six years.
But excluding the dairy sector, overall exports have held up, so far, latest trade figures show.
New Zealand ran a small trade surplus of $123 million in April, with exports for the month down 5.5 per cent on a year ago, while imports were up slightly, Statistics NZ said.
The surplus was close to market expectations of about $100m for the month.
But monthly dairy exports are down more than $320m on levels seen a year ago a dive of 27 per cent, reflecting the slump in milk powder sales especially to China, while imports of aircraft and consumer goods lifted the trade values coming into the country.
However, for the year to April, the trade shortfall was $2.6 billion, the biggest deficit since the middle of 2009.
The trade deficit is a big turnaround from the $1.1 billion surplus seen just a year ago, and most of the blame can be laid on the slump in dairy exports.
ANZ economists said with the Global Dairy Trade auction price down 27 per cent since March, the value of monthly dairy exports was expected to keep falling. The annual trade deficit was expected to widen, given the worsening terms of trade and the domestic nature of economic growth and a still high dollar.
The current account deficit looked set to worsen towards 5 per cent of GDP by the end of the year, ANZ said.
“A lower New Zealand dollar remains the safety valve and a lower official cash rate would help deliver it,” ANZ said.
Infometrics economists said the annual trade balance was likely to get worse in coming months as export prices remained subdued, at the same time as robust domestic activity would lift demand for imports.
“With dairy prices yet to stabilise and most other key export commodity prices having retreated since late 2014, export receipts are likely to remain constrained through the middle of 2015,” Infometrics said.
Fonterra is expected to announce an opening farmgate milk price forecast for the coming season on Thursday, of about $5. Some economists expect the final payout may reach $5.70 by the end of the season, but Infometrics is less optimistic, picking a final payout of just $4.80.
Excluding the dairy sector’s weakness in the past year, exports were up 2 per cent on a year ago, so “all is not lost” Bank of New Zealand economists said.
At the same time, demand for imports looked healthy with consumer goods up more than 6 per cent on April last year. Business investment intentions are also strong with capital goods up sharply, too.
Excluding the impact of big one-offs of aircraft in April and the impact of a dive in oil prices, Bank of New Zealand economists said imports were up more than 4 per cent on a year ago.
“We’re left with the impression that imports were stil doing well, in a trend and volume sense in April,” BNZ said.
However, the current account deficit was expected to worsen to 4.3 per cent of GDP by the middle of this year, BNZ said, from 3.3 per cent at the end of last year. That was something to keep an eye on as the terms of trade came off their 37-year highs seen last year.
