AU: Merchandise Trade

Wed Dec 02 18:30:00 CST 2015

Consensus Actual Previous
Level A$-2.7B A$-3.3B A$-2.3B
Imports-M/M 0.3% 1.7%
Imports-Y/Y 6.5% 4.7%
Exports-M/M -3.0% 3.4%
Exports-Y/Y -1.3% 5.3%

The October trade deficit widened more sharply than expected, due to fewer exports. The deficit was A$3.3 billion after September's A$2.4 billion. Seasonally adjusted, the value of exports fell 3 percent compared to September, largely due to less demand for commodities such as gold. Imports however, edged up 0.6 percent. On the year, exports dropped 1.3 percent while imports were up 6.5 percent.

Non-rural goods exports were down 3 percent while rural good slid 4 percent. Non-monetary gold was down 8 percent. Services credits however were up A$8 million. Intermediate and other merchandise goods imports were up 3 percent while capital goods added 4 percent. Consumption goods retreated 4 percent and services were down A$20 million.

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.