New Zealand's monthly goods trade deficit widened far more than expected in September, as imports climbed while exports stalled, adding to a run of mixed signals for the economy just over a week before the Reserve Bank of New Zealand's (RBNZ) next policy decision.

The shortfall came in at NZ$1.971 billion, more than double the roughly NZ$0.775 billion deficit economists had forecast and wider than August's gap of NZ$1.536 billion. Imports rose to NZ$8.44 billion from NZ$8.02 billion, while exports were essentially flat at NZ$6.47 billion, a touch below the prior month's NZ$6.48 billion For readers tracking the release, the monthly goods trade balance is the gap between the value of what the country sells abroad and what it buys from the rest of the world, and the figures feed into gross domestic product through the net exports component — giving the print relevance beyond the immediate market reaction.

At a glance:

• Trade balance (September): –NZ$1.971 billion vs. –NZ$0.775 billion expected (August: –NZ$1.536 billion)
• Imports (September): NZ$8.44 billion (August: NZ$8.02 billion)
• Exports (September): NZ$6.47 billion (August: NZ$6.48 billion)
• The wider deficit came entirely from higher imports, with exports flat
• The services sector posted a fourth straight month of modest expansion, with the BNZ-BusinessNZ Performance of Services Index at 50.9 and employment just below the 50 mark
• The RBNZ, which lifted the cash rate to 2.75% in September after two straight hikes, decides next on 28 October at 01:00 GMT (21:00 US Eastern on 27 October), ahead of the 7 November election

The composition of the deterioration matters as much as its size. With exports unchanged, the entire widening came from the import side. A fuller breakdown by category will show how much of the rise reflects higher fuel costs — a concern businesses have repeatedly flagged — versus stronger demand for capital and consumer goods.

In accompanying analysis, the report said a wider trade gap is a modest negative for the New Zealand dollar at the margin, since a larger external deficit means more reliance on foreign funding. Oil was identified as the key channel to watch: with the Iran war keeping crude prices elevated, confirmation that fuel drove the import jump would point to imported inflation pressure the RBNZ cannot ignore. That, the analysis argued, cuts against the dovish read from soft domestic demand and keeps further tightening on the table. Rate markets will weigh the print against the pause they have leaned toward for 28 October, while China's growth data due later in the day was seen as mattering more for the kiwi's near-term direction, given China's role as a key export market.

The trade figures follow the latest services survey, which showed the sector expanding for a fourth straight month in September, though only marginally, with the BNZ-BusinessNZ Performance of Services Index at 50.9, just above the 50 threshold that separates expansion from contraction. Employment in that survey sat just below the 50 line, and firms cited cost-of-living pressures, fuel prices, interest rates and the upcoming election as their main worries. Taken together, the two releases describe an economy that is growing, but unevenly, with households and businesses facing rising costs.

That backdrop sets up a finely balanced decision for the RBNZ on 28 October, with the announcement due at 01:00 GMT (21:00 US Eastern on 27 October). The central bank has raised the official cash rate at its last two meetings, most recently by 25 basis points to 2.75% in early September, as annual inflation climbed to 4.1% in the June quarter. Governor Anna Breman said at the time that a further increase was likely but that its timing was highly uncertain, and that policy was not on a preset course.

Market pricing has leaned toward a pause this month. The October review is a shorter statement without new forecasts, so the focus will be on whether the bank retains its tightening bias, and on any comments on the exchange rate and imported inflation.

The meeting also comes just ten days before the 7 November general election, a period that the services survey suggests is already keeping businesses cautious. A softer domestic economy argues for patience, while elevated inflation and rising import costs argue for keeping the door open to further hikes.

Source: ForexLive via InvestingLive — New Zealand trade deficit widens to nearly NZ$2 billion, more than double forecasts