Trade deficit much lower than expected

Lowest October deficit since the mid-1990s of just $168 million, Statistics New Zealand says

27th Nov 13, 10:51am by David Hargreaves

<a href="http://www.shutterstock.com/">Image sourced from Shutterstock.com</a>

The trade balance for October 2013 was a deficit of $168 million - the lowest for an October since the mid-1990s, Statistics New Zealand says

October months historically show deficits. The average market expectation was for a deficit of $350 million.

The New Zealand dollar briefly blipped up to US82c from US81.85c on the news before quickly falling back again.

However, the news is further confirmation that the New Zealand economy is now rapidly strengthening.

A big post-drought surge in dairy-related exports has been largely responsible for the much better than expected figures.

ASB economist Christina Leung said the October trade balance painted a positive picture of continued strength in underlying demand for our exports.

"Demand for our dairy exports has recovered from the Fonterra whey contamination scare in August, and strong milk production in recent months point to further increases in dairy export volumes over the coming years.

"We expect that China’s expanding middle class, and with it a growing demand for protein, will underpin continued strong global demand for our dairy and meat exports.

"The increase in our Terms of Trade provides an income boost for the NZ economy. Along with the rebuild taking place in Canterbury, we expect rising NZ economic activity will see a lift in underlying inflation pressures over the coming year and prompt the [Resrve Bank] to raise the [Official Cash Rate] in March 2014," Leung said.

Stats NZ's industry and labour statistics manager Louise Holmes-Oliver said. the low trade deficit was due to exported goods recording the highest value for an October month.

"It was the highest value for exported goods for any month since March 2013."

The value of exported goods rose $783 million (23%) to $4.2 billion. This rise was due to milk powder, butter, and cheese, up $690 million, while quantities increased 22% in October 2013.

The value of imported goods rose $237 million (5.7%) to $4.4 billion. All three broad economic categories rose, with intermediate goods showing the largest increase, up $93 million.

After removing seasonal effects, the value of exported goods in October 2013 fell 8.2% compared with September 2013. A fall in crude oil export quantities from September 2013, which were at their highest level since July 2012, had a large effect on seasonally adjusted exports.

Seasonally adjusted imports for October 2013 rose 0.1 percent compared with September 2013.

Trade balance, monthly

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Source: Statstics NZ

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40 Comments

by Placibo | 28th Nov 13, 4:34pm 1385609690

Or thanks to the middle class not paying enough taxes, or thanks to the welfare state, or thanks to govenment spending or thanks to the GFC, or the terms of trade, or... The world in not one dimentional Factboy even if you happen to see things that way

by Stephen Hulme | 27th Nov 13, 11:32am 1385505168

The low trade deficit was due to exported goods recording the highest value for an October month," Stats NZ's industry and labour statistics manager Louise Holmes-Oliver said.

"It was the highest value for exported goods for any month since March 2013."

And yet it was still a deficit.:

The trend for import values has been increasing in recent months, but appears to be flattening. Read more

Is it a case of kitchen ATM funded marble benchtops gaining ascendancy over the granite equivalent, as in the US? Read more

by Alter Ego | 27th Nov 13, 1:29pm 1385512197

Rooters seems to agree with you Stephen.

Naturally we would not do it here, borrow more to pay for the leaky tap, we could not afford in the first place and put the bill on the house, we have leveraged to death and maybe beyond.

But just checkout the interest rates margins NZ have to pay, compared to a Yank one in the link below, who we mostly borrowed from at..."Mates Rates" with their quantative squeezing from a fractionally reserved bank to on-lend to another in the same boat they are massively bailing.

http://blogs.reuters.com/felix-salmon/2013/11/26/are-heloc-defaults-about-to-spike/

Maybe a benchmark to ponder over?.

Maybe we should have non-course loans. Like the Yanks.

NZ cannot walk away from our debt, no matter how fractionally involved.

Maybe some should understand what I mean. See link below.

http://en.wikipedia.org/wiki/Home_equity_line_of_credit

by Roger Witherspoon | 28th Nov 13, 5:54pm 1385614447

Yes, non recourse loans sounds good to me. One of the strengths of the American system used to be the ability for people to make a new start, to be beaten and then get up again. "Don't kick a man when he's down" as people used to say. Our laws strongly favour creditors, but does it really help? Better to recognise the loss as early as possible and move on.

by iconoclast | 28th Nov 13, 7:13pm 1385619222

An excellent idea

From a regulatory perspective it would encourage the banks to be their own policeman

All it requires is for the government to legislate that all mortgages with an LVR of 80% and above automatically becomes a non-recourse loan. Banks could of course exceed 80%, but at their risk.

Under the current RB rules, borrowers can get around the 80% by obtaining second and third mortgages. The new regimen would dictate that anything other than a first mortgage is non-recourse regardless of the combined LVR

All pre-existing mortgages would be subject to the new rules on rollover or reset or re-financing.

by PeakEverything | 27th Nov 13, 11:50am 1385506254

Paying back the debt will be the least of our grandkids problems. Luckily for them global collapse of the financial system might "fix" the problem.

by The best statu… | 27th Nov 13, 12:00pm 1385506851

Gee, a cheerful lot on here today! Always finding a negative out of good news as this disappoints the lets have a Labour/Green/Mana/NZF Utopian government. Good timing for all the good news 12 months out from an election.

And to think Russell Norman wants to shoot 20% of our cows:).

by Andrewj | 27th Nov 13, 12:04pm 1385507046

on the bright side, they would get good money in the USA and help the deficit. If they can then produce the same amount of milk it could be a winner. That Norman guy, could just be smarter than he looks.

by The best statu… | 27th Nov 13, 12:12pm 1385507542

Normonomics would kill this country. He is a fiscal fool.

BTW, did you see the UN saying we should think of drinking other milks:

http://www.rawstory.com/rs/2013/11/26/un-food-agency-says-alpaca-donkey…

This can be taken 2 ways as follows:

1. The deciples at this site will say this is a good thing as it will depress our milk price, increase our economic ills and we will need to vote a L/G/Mana/NZF government to get to Utopia.

2. The worldwide view that cow milk will keep being expensive as demand is increasing for cow milk products and other sources will be needed to replace the hole. Good for NZ.

by Grant A | 27th Nov 13, 12:14pm 1385507697

Sorry The Best Status, convincing all that good news is really bad is what most are good at here

by The best statu… | 27th Nov 13, 12:36pm 1385508962

A real glass is half empty mentality here. I wonder if they are as misrable at home also!

At least they won't go smashing the TV tonight when the news is on as this good news story will not pass the 'does Russell & David want us to report this'. Main story will be about Greenpeace running to court.

by moa man | 27th Nov 13, 12:43pm 1385509419

Yeah. So you think every major central bank in the world printing money at will is good news?

Grow up.

by The best statu… | 27th Nov 13, 1:01pm 1385510515

We are not though printing money. But Wussle thinks it is the way to prosperity though. Fiscal fool.

Get real Moa Man, your so called bright ideas, well died with the Moa.

by Stephen Hulme | 27th Nov 13, 1:10pm 1385511014

No, but NZ banks do borrow up to ~40% more than our local deposit base from near zero interest bound foreign currency nations printing money to on lend primarily in the form of non-productive mortgages.

by Henry_Tull | 27th Nov 13, 1:33pm 1385512435

and to others have the gall to turn and say, look what you have done.....

..... says lower-cost regions, like New Zealand, have already “largely capitalised their efficiency gains in a high milk-price environment into the price of land and other assets”.

http://www.interest.co.nz/rural-news/67544/rabobank-points-out-survivin…

- we always thought DFC was brave in the 80's lending against fishing quota, but advancing funds against efficieny gains.. its brilliant, its sounds almost too good to be true...

then there is what ours lending big brothers are up to (one lending bank, two Reserve Banks):

New figures show banks wrote $10.8 billion in loans with a loan-to-valuation ratio of 90 per cent or more in the quarter – 14.1 per cent of all housing loan approvals.

Read more: http://www.smh.com.au/business/banking-and-finance/highly-leveraged-home-loans-on-the-rise-20131126-2y7e6.html#ixzz2lnkN0qx7 and Australian banks should not forget the lessons of the housing market collapses in economies such as Spain, Ireland or the United States, the nation's banking regulator says.

Read more: http://www.smh.com.au/business/the-economy/banks-need-to-learn-from-housing-bubbles-says-regulator-20131127-2y8ql.html#ixzz2lnkdeFXq

by Grant A | 27th Nov 13, 1:48pm 1385513331

Very true Stephen, we as NZers borrow more than we can fund ourselves, and that's one of the big reasons that we pay a premium for our interest rates over many others. Please feel free to make that point occassionally when some on here complain about that comparison in full ignorance of that fact.

by PeakEverything | 27th Nov 13, 3:48pm 1385520489

Grant, don't get us started on those debt pushing money hungry banks!

by Andrewj | 27th Nov 13, 4:13pm 1385521985

God Invented Economists To Make

Astrologers Look Good

by Grant A | 27th Nov 13, 4:19pm 1385522364

ZZ - yes the price of relative success is often a higher exchange rate than moderates that success, but equally when you're the other way around, a lower exchange rate partly bails you out...what do you expect, a one way trip ? And I will never understand ZZ why you have a hung up about banks making good profits when the economy is going ok, live in NZ when that's not the case and see which you prefer. I much prefer a profitable banking industry making money (at a ROE in the middle of the NZ100 spectrum) that's happy to keep supporting the economy, rather than what we're currently seeing in the US and Europe that is a big part of their recovery problems...all to our own I guess

by MikeM | 27th Nov 13, 7:24pm 1385533467

The best way to judge a bank's ROE would be to analyze its respective risk weightings, would it not?

by Grant A | 27th Nov 13, 9:16pm 1385540170

Yes good thought Mike, I'd like to see the comparative statistics tks

by Stephen Hulme | 27th Nov 13, 4:20pm 1385522453

Hey, near zero cost money is not a feature one associates with reflective investment valuation analysis.

Andrewj posted an interesting article on share analysis in such an environment. authored by the respected J P Hussman - read more.

Henry-Tull also linked an interesting local article pointing out valuation pitfalls - read more

by Andrewj | 27th Nov 13, 4:28pm 1385522914

Take the Money and Run: China's Ill-Gotten Wealth Flees Overseas

http://www.oftwominds.com/blog.html

http://www.usatoday.com/story/money/business/2013/11/26/banks-fees-deposits/3711987/

by Happy123 | 28th Nov 13, 10:44am 1385588696

It is bad news depending on where you sit. The last time we had a left wing govn in the naughties they orchestrated the biggest property boom in NZ history. So with my PI hat on I can't wait for another left wing spend up. They did of course blow the budget which National is now having to get back on track.

Labour is a true supporter of property investors.

by Stephen Hulme | 28th Nov 13, 10:55am 1385589343

Very true - it was the same when I worked at a stockbroking firm - most of the staff claimed to support National but were pleased with the pick up in fee business when Labour won an election.

by Anarkist | 28th Nov 13, 11:27am 1385591230

Rubbish Happy123

No singlee public body can orchestrate a housing bubble, not even a national government, there are too many social, political, and economics at play, both foreign and domestic. Not to mention that virtually country in the world with relativel bouyant growth rates has experienced a housing bubble since the collapse od Bretton Woods and the liberalization of credit markets, since the mid 1970s.

What blew the Budget in the early years of the Nzational Party was a abrupt decline in tax revenues due to the 2007 recession and GFC, not to mention National's tax cuts to the weathly which were essentialy an unnecessary election bribe, iven that the wealthy, through untaxed capital gains were already the beneficiaries of a historic growth in their household wealth.

Our economic fortunes have been saved through a fortuitous combination of an accomadating Reserve Bank monetary policy, repatriation of foreign reinsurance fund for the Christchurch Earthquake, and a cultural preference for Chinese mothers for cow milk over natural bresstfeeding to feed their young. Hardly a glowing testimony to National's economic management.

by notaneconomist | 28th Nov 13, 12:20pm 1385594405

Couldn't agree more.....Happy 123.

by KH | 27th Nov 13, 12:47pm 1385509663

Being depressed about our continuous trade deficit is only realistic. Be as happy as you like, but it means you are out of touch.

by The best statu… | 27th Nov 13, 1:05pm 1385510729

Look at the trend, some months positive, some negative. This is a good result seasonally adjusted.

The economy is gaining momentum, I know that that thought is hated here, especially as we are doing so much better than our counter parts in other 'like' countries.

by Grant A | 27th Nov 13, 1:17pm 1385511468

The best status - fortuantely we're flexible on here with what we think "like" countries are. When we want to compare our "high" interest rates to others, we like to compare ourselves to strugglers like the US & European. But when we want to compare ourselves in terms is economic performance & growth rates (and we increasingly don't like to do that because its killing our negative arguments) we like to compare ourselves to the likes Norway, Singapore or China. Please don't say we're not flexible in here

by Grant A | 27th Nov 13, 4:28pm 1385522919

Do you understand what drives long-term rates ZZ ? - the perception of why the cash rates will go over time, credit risk, and relativelity to other benchmarks (in our case mainly the US and Australia), or a combination of the above. When you compare Cyprus to NZ, what aspect are you comparing and what point are you making ?

by Grant A | 27th Nov 13, 5:01pm 1385524888

News to me that they're record margins ZZ - love to see some evidence of that unless of course you don't understand funding spreads...I'm sure you do so I'd really like to see the numbers so that I can happily join your club if thats they case...by the way, high margins or not, where should their profit margins sit in the NZ100, at the bottom ? where would make you happy ?

by PeakEverything | 27th Nov 13, 3:21pm 1385518872

Having a better deck chair than most on the Taitanic is not something to get too excited about.

by Grant A | 27th Nov 13, 7:39pm 1385534379

Very true ZZ, their mortgage rates are around 1.30% - 1.50%, very attaractive - but what are they paying their depositors ? ....about 0.15%...why, because there's no shortage of investment and savings in that economy. What does NZ, with its massive 40% saving shortfall, force the banks to pay to savers for theirs ? 4.00% plus, and believe me, whilst borrowers can walk into banks and get a deal, so can savers/investors. The banks have a deposit ratio that they have to comply with and are well ahead of the RBNZ's targets in that regard, but are having to pay through the nose, 1.50% plus above the bank bill rate (25bps above the OCR) to access the funds even before they apply a margin to.

More examples ?

by Grant A | 28th Nov 13, 10:26am 1385587580

ZZ - I think you think this is all black and white, and it's not - welcome to the markets and my world. Those combination of factors I mentioned earlier play out differently from country to country and differently from one cycle to the next. Yes in really simple terms if an economy is performing well and has plenty of investment and savings, and is an attractive destination of investment flows (e.g. Singapore), you will have a lower relative interest rate than many others. If you're a basket case (e.g. Greece) you will have high or shocking high interest rates. If you can't self fund like NZ, and don't print money, you won't have US or Singapore style very low rates

But if youre managing your economy relatively better and are attracting capital flows, such as NZ is, you'll be somewhere in between. The fact remains if you're not self funding, and having to pay our modest number of savers 150bps above Bank bill (4% plus), you aren't going to have interest rates for borrowers at the same level as many others. I find it amusing that heavily indebted borrowers, many that have never saved in their lives, are effectively criticising savers for demanding a positive real interest rate..most are so niave about it that they think banks set the overall level, and that in deciding to temporarily shrink their margins to gain a temporary market share gain, is a sign of falling rates (I.e. Totally lose the big picture) ...in the US it's negative real interest rates not just because of the QE, but also because the market can price it that way.

by JB | 27th Nov 13, 3:43pm 1385520235

This is no different from a household saying we only spent a bit more than we earned, so we still have to borrow to pay the interest on our interest only mortgage.

Doesn't sound like much of a problem as yet ... but compound interest and higher interest rates will one day work their magic and then we will see if the Kiwi retains it's ability to fly as it does in the minds of many.

by goNZ | 28th Nov 13, 2:16am 1385558195

Drill,baby,drill ..! NZ can do way better yet unless that Bunny from Greenpeace can rabbit on to a judge in the High Court as she hops from one scare mongering issue to the next

by steven | 28th Nov 13, 7:40am 1385577611

and when we are drilled out what then? (even if it was economic). Consider Shell etc have pretty much left NZ, that should tell you that the majors dont see enough economically viable oil here to stay.

Some interesting statistics in deep sea drilling and how high the %s are for accidents and spills the deeper you go.

regards

by raegun | 28th Nov 13, 8:26am 1385580397

Yes let's drill all the oil out, let's send it off to China to be turned into plastic (as that is what the majority of it is used for) let's even use another fossil fuel to do it. Let's get our backsides to the Warehouse and the $2 shop and buy all that plastic up, let's take it home and fiddle with it for a few hours, then let's throw it in the land fill.

Yes, THE most important thing in the world that we, the one's on the planet now, satisfy our hunger for plastic junk, sealed in plastic packaging, placed in plastic bags, I am sure our descendents will thank us for the legacy we leave them

Is it possible for some of us to think beyond our goddam wallets?

by Alter Ego | 28th Nov 13, 8:42am 1385581332

No let us dig for Gold. What harm can it do. Only 5 banks involved in the collusion.

http://www.bloomberg.com/news/2013-11-26/gold-fix-drawing-scrutiny-amid-knowledge-tied-to-eruption.html

Then apply this.

http://www.bloomberg.com/news/2013-11-26/speed-traders-meet-nightmare-on-elm-street-with-nanex.html

To see who is really benefitting from the price flucktuations.