China slump weighs on NZ trade

Official data shows the value of goods imported into New Zealand from China slumped 18 per cent year on year for the four weeks to February 29 on the back of economic disruption caused by the coronavirus, or COVID-19. Total imports from all regions (including China) fell 11 per cent in value terms.

Further deterioration in trade data with China is likely. ANZ Research is hopeful China’s activity will continue to recover but it is expected to be gradual. It will be some time before trade volumes return to normal levels.

Even once China is close to running at normal production it will take time for distribution backlogs and supply chains disruptions to resolve. Plus, even if industrial activity resumes in China, consumer and firm behaviour will take longer to truly normalise.

This all comes is at a time when dry weather conditions in NZ are already weighing on farmers.

“Even if industrial activity resumes in China, consumer and firm behaviour will take longer to truly normalise.”

First glance

The data is the second preview of official trade data after Statistics NZ released a “first glance at provisional NZ trade with China after the coronavirus outbreak” earlier in March. The releases are intended to help Government, businesses, and analysts alike understand some of the possible initial implications of COVID-19 disruption.

The data are provisional in nature, meaning they will be subject to revision. In particular, these data are based on ‘intentions to export’ so won’t capture some cancelations. 

The timing of the Chinese New Year holiday can make year-on-year comparisons a little noisy. The holiday occurred earlier in 2020 than in 2019, meaning the flurry of exports to China associated with the holiday and the subsequent unwind happened a little earlier this year. The data do not get adjusted for this.

Bright spot

The data confirms exports of seafood have been hit hard and forestry export prices have fallen away sharply. Meat exports volumes are less than half what they were during a similar time period last season.

The bright spot is dairy exports. The value of dairy products exported to China in February 2020 was 45 per cent higher than at the same time last season.

Volume data for this sector hasn’t been released and some of the recent strength will be a price impact, but does indicate dairy exports have held up extremely well throughout the supply chain disruptions that have occurred this season.

In contrast the quantity of meat exported to China in the four weeks to February 29 was 54 per cent less than the same time last year and also well back on previous years.

Forestry returns from exports to China fell 42 per cent, hurt by volumes dropping 17 per cent amid significantly lower prices than seen in recent years.

Seafood returns are the lowest seen in five years and confirm just how hard this industry was hit by the reduction in demand from China.

Susan Kilsby is an Agricultural Economist & Miles Workman is a Senior Economist at ANZ NZ