{"id":146465,"date":"2019-04-25T15:35:13","date_gmt":"2019-04-25T19:35:13","guid":{"rendered":"https:\/\/www.countingpips.com\/?p=146465"},"modified":"2019-04-25T11:20:38","modified_gmt":"2019-04-25T15:20:38","slug":"new-zealands-trade-balance-is-coming-up","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2019\/04\/new-zealands-trade-balance-is-coming-up\/","title":{"rendered":"New Zealand\u2019s Trade Balance Is Coming Up"},"content":{"rendered":"
April 25, 2019<\/div>
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By <\/strong>Orbex<\/strong><\/a><\/p>\n

We\u2019ve had an adjustment in the RBNZ\u2019s outlook to reflect the less than satisfying data we have been seeing lately. But is one of the more important economic indicators for the currency going to reflect that?<\/p>\n

Or are we going to have a better result? What can we expect from the trade balance, and how does it translate into currency moves?<\/p>\n

Expectations and Schedule<\/strong><\/h2>\n

The trade balance for March is coming out on Friday at 00:45 CET (which would be Thursday at 18:45 EST). The annualized version will also be published. The markets are likely to scrutinize the individual components of the balance just as much as the headline.<\/p>\n

The consensus among surveyed economists is that\u00a0the trade balance slipped into deficit, by just NZD271M<\/strong>. This would have reversed last month\u2019s minuscule surplus of NZD12M. And it would lead the\u00a0annualized trade deficit<\/strong>\u00a0to plunge further into multi-year lows, coming in at\u00a0-NZD6.6B,<\/strong>\u00a0compared to the -NZD6.2B in February.<\/p>\n

The Markets and Currency<\/strong><\/h2>\n

Trade is the second largest driver of forex prices. So, if we have a significantly disappointing trade balance, that could add substantial weakness to the NZD and vice versa.<\/p>

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But often, just as important is\u00a0why<\/em>\u00a0the trade balance is trending in a certain direction and what that implies for the future of demand for the currency.<\/p>\n

New Zealand has traditionally had an economy that was largely dependent on exports. But that has been changing in recent years, with a focus moving towards tourism.<\/p>\n

On that front, we\u2019ve had good news this year. The larger summer tourist season is closing out with a record number of tourist arrivals. However,\u00a0with tourism winding down, the demand for the currency from visitors will also do so, putting some downward pressure on the exchange rate.<\/strong><\/p>\n

The Components that Drive Sentiment<\/strong><\/h2>\n

Last month was exemplary of New Zealand trade development, where exports jumped 8.3% over the prior year. This is something that would make most countries quite happy.<\/p>\n

On the other hand, imports advanced by 12.9%, which is what erased most of the gains from the growth of exports in the trade balance. Increasing demand for foreign goods can\u00a0usually\u00a0be interpreted as an expression of health within the domestic economy. But, we\u2019ve also been\u00a0seeing a steady increase in private lending and household debt in line with the expanding trade deficit.<\/strong><\/p>\n

Financing for the increasing trade deficit has come with increased foreign investment and capital flows \u2013 up until the beginning of this year when we saw a reverse in the trend.<\/p>\n

Internal and External<\/strong><\/h2>\n

New Zealand exports are being buoyed by\u00a0increases in dairy prices<\/a>\u00a0due to a lack of supply in the market, as explained in previous articles. New Zealand is also one of the countries that have been expanding their reach into China lately, with the Asian giant being their largest customer despite the economic cooling. In fact, it was just on Monday the PM of New Zealand concluded a trade-boosting trip to China.<\/p>\n

The rising demand for imports might be explained by the increased cost of crude, with fuel being one of New Zealand\u2019s chief imports. But it\u2019s not: that would be consumer items, in particular cars, which are bought primarily on credit in New Zealand. Should the RBNZ cut rates in the future, that would make credit easier for customers, and likely support the trend for higher imports.<\/p>\n

Even though last month managed to eke out a small surplus, the trend towards deficit remains still clearly defined; a positive trade balance, and the concurrent strength in the NZD, would likely be an exception going forward.<\/p>\n

By <\/strong>Orbex<\/strong><\/a><\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

By Orbex We\u2019ve had an adjustment in the RBNZ\u2019s outlook to reflect the less than satisfying data we have been seeing lately. But is one of the more important economic indicators for the currency going to reflect that? Or are we going to have a better result? What can we expect from the trade balance, […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-146465","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/146465","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=146465"}],"version-history":[{"count":2,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/146465\/revisions"}],"predecessor-version":[{"id":146474,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/146465\/revisions\/146474"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=146465"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=146465"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=146465"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}