January merchandise trade deficit nearly doubled from the month before as a lower Aussie dollar caused imports to accelerate faster than exports. The deficit widened to A$980 million from A$503 million in December. Imports were up 3.0 percent on the month but down 0.3 percent from a year ago while exports gained 1.3 percent but were 6 percent lower than the same month a year ago.
Rural goods exports dropped 2 percent with cereal grains and cereal preparations contributing to the decline. Non-rural exports were up 2 percent with other mineral fuels, transport equipment, other manufactures and coal, coke and briquettes contributing to the increase. Partly offsetting these increases was metals (excluding non-monetary gold). Services exports declined with travel and transport contributing to the decline.
Intermediate and other merchandise goods imports were up 4 percent while capital goods added 6 percent and consumption goods gained 3 percent.
Merchandise trade balance measures the difference between imports and exports of both tangible goods and services. The level of the international trade balance, as well as changes in exports and imports, indicate trends in foreign trade.
Changes in the level of imports and exports, along with the difference between the two (the trade balance) are a valuable gauge of economic trends here and abroad. While these trade figures can directly impact all financial markets, they primarily affect the value of the Australian dollar in the foreign exchange market. Imports indicate demand for foreign goods while exports show the demand for Australian goods in its major export market China and elsewhere. The currency can be sensitive to changes in the trade balance since a trade imbalance creates greater demand for foreign currencies. The bond market is also sensitive to the risk of importing inflation. A word of caution -- the data are subject to large monthly revisions. Therefore, it can be misleading to form opinions on the basis of one month's data.
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