Aussie trade deficit to narrow - Socgen

Analysts at Societe Generale are expecting Aussie trade deficit to decline for November.

Key Quotes:

"Although reality defied predictions of a sharp narrowing in the trade deficit in October – it actually widened by AUD269m – we again forecast a sizable decline for November.

The main argument on the export side remains the steep increase in commodity prices in recent months, especially of iron ore and coal in its various forms, which will continue to feed through to export prices that will take time to adjust.

But then the larger-than-expected October trade deficit was not really driven by disappointing export performance – at 1.4% mom it was not far from our expectation of 2.0% – but rather by unexpectedly strong imports which rose 2.3% mom when we expected a decline of 0.4%.

The strength of imports is unlikely to be sustained in our view, especially as it was concentrated in imports of capital goods at a time when overall business investment continues to contract. Hence, we expect a strong decline in imports and a decline in the deficit of close to AUD1bn."