27 Nov 2018

Oil price rise fuels trade deficit to 11-year high

2:33 pm on 27 November 2018

Surging oil prices and a lower dollar have driven the trade deficit to an 11-year high.

Fuel pump.

Photo: RNZ / Alexander Robertson

Official figures show the annual trade shortfall hit $5.8 billion, the highest since October 2007.

Monthly imports hit a record $6.2b as the cost of fuel imports rose by nearly three quarters on this time last year.

"The value of goods imports has been at a generally high level in recent months, with the New Zealand dollar declining and higher crude oil prices," Stats NZ international statistics manager Tehseen Islam said.

"Imports of petroleum products tend to fluctuate from month to month. In recent months value and quantity have been at high levels," he said.

Increased spending on mechanical and electrical machinery, as well as cellphones pointed to reasonable business investment and consumer demand.

Exports rose nearly 7 percent, but could not keep pace with the rise in imports, although a boost in kiwifruit, meat and logs more than offset softness in dairy exports.

"We expect the annual trade deficit to narrow modestly over the coming year on the back of strong agricultural production and export volumes this season," said ASB senior rural economist Nathan Penny.

China cemented its position as our number one trading partner with two-way trade worth $25.8b for the year ended October, which is one-third higher than two-way trade with Australia.

"The ongoing US-China trade frictions pose risks to our view that the trade deficit reduces over the next year. The key risk is that demand for NZ exports slows as the trade tensions weigh on global sentiment and then global growth," Mr Penny said.

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