The trade deficit narrowed to A$1.3 billion from a revised A$1.6 billion in February. Exports retreated 1.5 percent on the month and 4.1 percent on the year. Imports were down 2.4 percent in March and were up 2.3 percent from the same month a year ago.
Both rural and non-rural exports were down 2 percent. The main component contributing to the decline in rural goods was other rural, which was down 7 percent. Partly offsetting this decline was meat and meat preparations, up 5 percent. The main components contributing to the decline in non-rural goods were other mineral fuels and metal ores and minerals. Partly offsetting these declines was coal, coke & briquettes.
Intermediate and other merchandise goods imports declined 4 percent. Capital goods slid 4 percent and consumption goods were down 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.