Australia: Disappointing trade surplus figures for March - Westpac

Andrew Hanlan, Research Analyst at Westpac, explains that in March, Australia’s trade surplus disappointed markets as it took a hit by higher imports. The surplus fell to $3.1bn vs $3.7bn in its previous print with imports gaining by 4.6% and exports posting a jump of 2.4%.

Key Quotes

“For March, the trade surplus printed at $3.1bn, some $550mn below the $3.7bn outcome for February. The result fell short of expectations, market median $3.3bn and Westpac $4.0bn.”

“Import volatility was again a factor. The import bill rose 4.6% in the month (+$1.3bn), after a 4.7% fall in February and a 3.4% rise in January. Strength in January and the dip in February we put down to a pull-forward of import deliveries ahead of disruptions following Lunar New Year, which fell on January 28 this year.”

“In March, a 22% jump in fuel, $0.5bn, was notable. Consumption goods were also up strongly, reversing weakness in February. Export earnings advanced by 2.4% in the month, +$0.8bn.”

“Strength was evident in gold, metal ores and rural goods, with a partial offset by a fall in coal, due to disruptions associated with cyclone Debbie.”

“March quarter 2017

• For the March quarter, the trade surplus was $9.0bn, a $3.0bn increase on a $6.0bn surplus for the December quarter. That improvement fell short of our expectations and was disappointing given the rise in commodity prices.
• Our preliminary calculations suggest that real net exports were a negative in Q1, whereas we had anticipated a neutral impact. It may be that domestic demand is stronger than the 0.6% increase we are expecting.
• Export earnings increased by 5.4% in Q1, including a 6.2% lift for goods and a 2.4% gain for services. This is a surprising result, given that the export price index for goods jumped 9.4% in the quarter. Note though that quarterly movements in the balance of payments export deflator and the export price index do diverge.
• On balance, the result suggests that export volumes were flat to down in the quarter. The import bill grew by 2.4% in the quarter, with goods up 2.9% and services 0.7% higher. The import goods price index rose 1.2% in Q1, while we judge that the price for service imports fell, given that the currency appreciated by close to 2%. This suggests import volumes advance in Q1, following gains in each of the past three quarters.”