NZ: July’s merchandise trade headlines not that far from market - BNZ

Doug Steel, Senior Economist at BNZ, notes that the NZ’s July merchandise trade data generally underwhelmed market expectations.

Key Quotes

“Exports (-4.9% y/y) and imports (-10.3%) both undershot market priors. The monthly trade deficit of $433m was wider than the $325m deficit anticipated by the market. But the degree of surprise is relatively small for these often wobbly monthly figures. We wouldn’t read too much into that. Perhaps more important is that we think the trade deficit is starting to trend narrower.

The strength of the NZD continues to have a pervasive influence on both imports and exports. The NZD was 8% higher, on average, in July 2016 compared to a year earlier. After accounting for the influence of the ‘lumpy’ items and oil, and then adjusting for the exchange rate, underlying annual import growth is about flat.

The current account deficit has already reduced to 3% of GDP. We think it is headed towards 2% over the coming year or so, well below the 4% it has averaged over the past 20 years.”