Australia: Widening trade deficit – ANZ

Research Team at ANZ , notes that the Australia’s trade deficit widened sharply, with June’s deficit larger than expected and the May deficit revised higher.

Key Quotes

“Resource exports fell (although driven by non-monetary gold), while non-resource exports were largely unchanged. Imports rose, led by a strong rise in consumption goods imports.

Australia’s trade deficit widened sharply to AUD3.2bn in June from a revised AUD2.4bn in May. This was much larger than the market consensus, but closer to our forecast of AUD2.75bn.

• A decline in the value of resource exports (down 2.7% m/m) was the main factor behind the deterioration in the trade balance in June. Non-monetary gold exports (which are very volatile) were the prime drivers, dropping 15.5% m/m.

• Resource exports excluding non-monetary gold were largely unchanged (down 0.7% m/m in June). Metal ores and minerals (including iron ore) were down only 0.1% in June after a sharp increase in May. Coal exports also declined (down 5.5% m/m), but that only partially reversed the gain in the previous month.

• Other mineral fuel exports (including LNG) increased, up 1% m/m. Given prices (in original terms) were weak, this looks to have been driven by higher volumes. LNG export volumes are rising as mega projects come online.

• Net tourism and education exports continue to increase at solid rates – up 5.3% m/m in June and about 25% y/y.

• Imports rose at a solid rate too – up 2% m/m – largely reflecting stronger imports of consumption goods (+7.4% m/m ). Excluding volatile items total goods imports jumped 3.6% m/m.

• The rise in imports may be good news for the domestic economy as a whole as it may reflect higher households’ appetite for consumption.

• According to the ABS, the preliminary Q2 trade deficit was AUD7.98bn, slightly less than the AUD8.66bn deficit in the previous quarter.”