Although falling dairy exports continue, rising meat exports cushioned the impact last month making the 2014 result the second best November since 1991

Somewhat surprisingly, today's data release from Statistics NZ recorded a monthly trade deficit for November of $213 mln.

Markets were expecting a deficit of $575 mln.

Total goods exports fell -9.5% to $4.0 billion in November 2014 compared the same month a year ago. Imports fell -1.3% to $4.2 billion.

Dairy exports drove the fall, down -27%, with the quantity down -3.1%. The fall in dairy reflects the record high levels exported, mainly to China, in November 2013.

A +20% rise in meat exports partially offset the fall, led by a price-driven rise in frozen beef.

"The fall in export values reflects a return from the high values late last year, led by China," international statistics manager Jason Attewell said.

"The trend for exports to China is 42% lower than the series peak in December 2013, and is now at similar levels to 2012."

The monthly trade balance for November was a deficit of $213 million (5.3% of exports).

This is the smallest November deficit since 2010 although record high exports late last year resulted in the first trade surplus for a November month ($153 million) since 1991.

ASB's senior economist Jane Turner said:

We expect the trade deficit to widen over the coming year.  Export receipts will continue to fall, largely reflecting lower dairy prices.  The recent lift in the NZD/AUD will provide a headwind to exporters focused on the Australian market.  However, the outlook for US exporters has improved and may provide some offset.   Given China’s growing importance as an export market, the key risk to the export outlook remains a further slowdown in the Chinese economy over 2015.

We expect the weakness in November imports to be temporary and import demand to continue to lift in line with strong momentum in the NZ economy.  However, lower oil prices should limit the increase in imports and mitigate the widening in the trade deficit next year.