Australia: Trade surplus narrowed to $460mn in July - Westpac

Andrew Hanlan, Research Analyst at Westpac notes that in July, Australia’s trade surplus surprised to the low side, narrowing to $460mn from $888mn on lower exports, -2.2%.

Key Quotes

“In July, Australia’s trade surplus was smaller than anticipated, narrowing to $460mn from $888mn.”

“Expectations were for a broadly flat to larger surplus (mkt median $1.0bn and Westpac $1.4bn).”

“Imports met our expectations, declining by 0.9%, -$281mn. The stronger dollar in the month, up 2.5% on a TWI basis and 3% higher against the US dollar, made imports cheaper.”

“Exports disappointed, declining by 2.2%, -$709mn. We had expected a modest rise, +0.8%, reflecting the balance of countervailing forces. The pockets of anticipated weakness came through. Notably, gold moved lower off a high base, -$330mn, and fuels fell on weaker LNG volumes associated with disruptions, -$387mn. However, expected gains in metal ores and coal failed to materialise, with both recording small declines, -$115mn and -$108mn respectively. These declines were despite the iron ore price moving higher in the month and coal shipments moving higher, as suggested by unofficial data. Service exports were a positive in July, +$159mn, up 2.6%, extending recent strength consistent with positive fundamentals.”

“The takeout, this is a disappointing start to the September quarter. We expect export volumes to advance in Q3 as a whole, as additional capacity in the LNG sector comes on stream and as service exports rise further to meet increasing demand from the Asian region. We are also expecting net exports to make a positive contribution to growth in the third quarter, after a volatile first half in 2017, a -0.9ppts impact in Q1 and a +0.3ppts in Q2.”