June trade deficit was A$2.9 billion, slightly below expectations of a A$3 billion deficit. This was the 15 consecutive month that the trade balance has been in deficit. Exports were up 3.3 percent on the month and 0.7 percent from the same month a year ago while imports were up 3.9 percent and 4.8 percent.
Exports of non-rural goods were up 4 percent and non-monetary gold rose 28 percent. Rural goods slipped 1 percent. Imports of intermediate and other merchandise goods jumped 10 percent while consumption goods added 1 percent. Capital goods were down 1 percent while non-monetary gold declined 5 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.