February trade deficit expanded to A$1.3 billion from the revised A$1.0 billion in January. Expectations were for a deficit of A$1.4 billion. Exports to its main customer, China, have slowed along with slowing growth there.
Exports were up 1.0 percent. Rural exports were up 11.0 percent while non-rural goods were down 1.0 percent. Non-monetary gold was up 8.0 percent. Contributing to the increase in rural goods were other rural and cereal grains & cereal preparations. Contributing to the decline in non-rural exports were metal ores & minerals and transport equipment. However, coal, coke & briquettes and other mineral fuels partially offset the decline.
Imports were up 1.9 percent. Both intermediate & other merchandise goods and consumption goods were up 3 percent. Contributing to the increase in consumption goods were textiles, clothing & footwear and household electrical items. Imports of capital goods were down 2.0 percent. Civil aircraft and 'confidentialized' items contributed to the decline.
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.