Australia: Trade surplus narrows as imports lift – Westpac

Andrew Hanlan, Senior Economist at Westpac notes that in June, Australia’s trade surplus narrowed to $856mn, falling short of expectations (mkt median $1.8bn and Westpac $1.4bn).

Key Quotes

“Australian exports and Australia's trade balance have been buffeted by weather disruptions of late, particularly the fury of Cyclone Debbie.”

“The surplus for May was downgraded, lowered to $2.0bn from $2.5bn. April was also revised, sliding from a small surplus of $90mn to a small deficit of $76mn.”

“Imports for June were stronger than anticipated, increasing by 2.4% (+$730mn). We anticipated a small fall, -0.7% (-$200mn), led lower by weaker fuel prices. Fuel did fall, down $463mn. However, strength was evident across capital goods, consumption items, and gold.”

“Exports declined in June, but not as sharply as expected. Exports fell by 1.4%, -$439mn vs a forecast -4.0%, -$1.3bn.”

“Export weakness in June was evident in metal ores and coal, on weaker prices and volumes, broadly as anticipated. The upside surprises were in the volatile gold segment and fuels proved to be more resilient than anticipated.”

“For the June quarter, the trade surplus narrowed to $2.8bn from $7.5bn for the March quarter. This reflected the impact of falling commodity prices. Total export prices fell by an estimated 4.5% in the quarter and the terms of trade declined by around 5%.”

“Real net exports had a broadly neutral impact on growth in the June quarter, on our initial calculations, largely meeting our expectations, a forecast of +0.1ppts.”