New Zealand’s trade deficit swelled to a fresh record in October following a surge in imports of consumer goods and cars that suggest domestic demand is holding up strongly in the face of sharply rising interest rates.

The shortfall widened to NZ$12.9 billion ($8 billion) in the year ended Oct. 31, Statistics New Zealand said Tuesday in Wellington. The value of imports has surged 25% from a year earlier to NZ$84 billion, outpacing a 15% jump in exports to NZ$71.1 billion. 

New Zealand firms face higher global prices for fuel and other goods, while the local dollar’s weakening has only amplified those costs. Still, increased volumes of imported vehicles, mobile phone handsets and personal computers indicate underlying demand is solid despite the central bank’s aggressively policy tightening over the past 13 months. 

The Reserve Bank is forecast to raise the Official Cash Rate by 75 basis points at its meeting tomorrow to 4.25%.

“There are inflated prices rattling round the globe,” said Doug Steel, senior economist at Bank of New Zealand in Wellington. “But there are signs of excess demand and one response to that is to import more.”

There may also be an element of pre-stocking before the busy Christmas retail season, with businesses holding higher-than-usual inventory levels because of the risk of future supply chain disruptions, he said.

While imports are surging, there’s less production than usual from New Zealand’s dairy and sheep farmers and key commodity prices are easing, curtailing export growth, Steel said. BNZ forecasts the trade deficit will widen further to about NZ$14 billion by the end of 2022.

Vehicle imports rose 11% to NZ$10.9 billion in the year through October, the statistics agency said, citing a lift in shipments of electric cars. Fuel imports are up sharply after the closure of the nation’s only oil refinery in April, although that has been offset by a complete halt in crude imports.