AU: Merchandise Trade

July 4, 2016 08:30 CDT

Consensus Actual Previous Revised
Level A$-1.5B A$-2.2B A$-1.57B A$-1.8B
Imports-M/M 2.2% -0.8% -1.4%
Imports-Y/Y -1.1% -4.6% -6.5%
Exports-M/M 0.7% 0.6% 0.1%
Exports-Y/Y 3.1% 5.9% 2.6%

The May merchandise trade deficit climbed to A$2.2 billion from April's deficit of A$1.8 billion. Exports were up 0.7 percent on the month and 3.1 percent from a year ago while imports were 2.2 percent higher on the month and down 1.1 percent from a year ago.

Exports of non-rural goods were up 3.0 percent while rural goods were down 2.0 percent. Imports of intermediate & other merchandise goods were up 5 percent while capital goods were up 4 percent. Consumption goods slipped 1.0 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.