Weaker-than-expected exports, including lower shipments of
aluminium and falling exports of dairy and meat, pushed New
Zealand's October trade deficit much higher than forecast.
The October deficit was $718 million, compared with
expectations of a deficit of about $450 million.
New Zealand Aluminium Smelters, which operates the Tiwai Pt
aluminium plant at Bluff, last month halted $70 million of
planned capital spending, citing "extremely challenging"
market conditions that have eroded margins.
The change affected $15 million planned for the remainder of
2012 and 2013 and follows a review of all capital and
maintenance spending at the site, the company said in a
NZAS is in talks with Meridian Energy over electricity prices
for the aluminium smelter as the operation that takes about
15% of New Zealand's electricity seeks to trim one of its
The company announced it was making a total of 100 workers
redundant this year.
Rio Tinto owns 79.36% of NZAS and Sumitomo Chemical owns the
ASB economist Jane Turner said the 14% fall in seasonally
adjusted exports was led by a 50% fall in aluminium exports,
which appeared to be disrupted by the timing of shipments.
However, the October fall followed a 9% decline in the
"Beyond the shipment disruption there may have been some
production cutbacks responding to lower international
Dairy exports fell 15% in October because of lower volumes.
Dairy export volumes had fallen sharply in the past three
months, Ms Turner said.
A 12% contraction in meat export volumes also contributed to
weaker October exports, although the dip followed strong
growth in meat exports since May.
Encouragingly, there were signs meat export prices might have
started to lift in the past two months after falling through
the middle of the year, she said.
The ASB commodity price index showed meat prices had
stabilised but had yet to show any meaningful pick-up in
response to higher feed prices resulting from the United
States drought, Ms Turner said.
BNZ economist Doug Steel said October import values were up
1.7% on a year ago.
The increase was driven by capital and consumption goods,
with intermediate goods lower than a year ago.
There were no import volume estimates in the monthly trade
data. While slower annual economic growth in the second half
of the year was the general message, there was enough in the
import figures to suggest underlying growth had not stalled
altogether, he said.
The BNZ maintained its 0.2% and 0.6% forecasts for third and
fourth-quarter GDP growth respectively.
Likewise, the bank maintained its view the current account
deficit would widen to 5.5% of GDP in calendar 2012, from the
4.9% it reached in the year to June 2012, Mr Steel said.
"We see further deterioration ahead, with the current account
deficit expected to pierce through 6% during 2013.
"We continue to wonder how wide the external deficits have to
get before the market takes note, likewise the rating
agencies. The stark contrast between the 11% decline in
export values over the past year and the 33% lift in house
sales provides a vivid illustration of the current