AU: Merchandise Trade

Wed Jul 01 20:30:00 CDT 2015

Consensus Actual Previous Revised
Level A$-2.2B A$-2.75B A$-3.9B A$-4.14B
Imports-M/M -4.0% 3.9% 3.4%
Imports-Y/Y -0.3% 2.5% 2.4%
Exports-M/M 0.8% -5.7% -6.1%
Exports-Y/Y -2.8% -8.1% -9.3%

The May merchandise trade deficit was a slightly bigger than forecast A$2.75 billion, down from a revised deficit of A$4.14 billion in April. Exports edged up 0.8 percent on the month but were 2.8 percent lower than a year ago. Imports dropped 4.0 percent and were down 0.3 percent on the year.

Non-rural goods exports were up 2.0 percent while rural goods exports were up 4 percent. Non-monetary gold was down 26 percent. Contributing to the increase in rural goods exports were wool & sheepskins and other rural goods. Non-rural goods advanced thanks to increases in metal ores & minerals and coal, coke & briquettes with volumes recovering somewhat following weather related port closures in April 2015.

Capital goods imports declined in May contributing to the bulk of the decline there.

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.