AU: Merchandise Trade

June 7, 2017 08:30 CDT

Consensus Actual Previous Revised
Level A$1.8B A$0.56B A$3.1B A$3.17B
Imports-M/M -0.6% 4.6%
Exports-M/M -8.3% 2.4%
Imports-Y/Y 4.4% 10.0% 9.6%
Exports-Y/Y 17.6% 28.8%

Australia's trade surplus narrowed to A$0.56 billion in April from A$3.17 billion in March (revised from A$3.11 billion), below the consensus forecast of A$1.8 billion. This is the sixth consecutive monthly trade surplus but the smallest of these six, with weaker commodity prices and weather-related disruptions weighing on export performance.

In seasonally adjusted terms, the value of exports fell 8.3 percent on the month in April to around A$30.59 billion, down from A$33.37 billion in March. This decline was mainly driven by a sharp drop in exports of non-rural goods (around 60 percent of total exports), in part reflecting weaker iron ore prices. Cyclone damage to port infrastructure also contributed to a sharp drop in coal exports in April. Exports of non-monetary gold (around 5 percent) and rural goods (around 13 percent) also fell on the month. This was partly offset by an increase in exports of services (around 21 percent of the total).

Year-on-year growth in total exports decelerated from 28.8 percent in March to 17.6 percent in original terms, and slowed from 29.3 percent to 17.8 percent in seasonally adjusted terms.

Seasonally adjusted imports declined by 0.6 percent on the month in April to A$30.04 billion, down from A$30.21 billion in March. Imports of consumption goods, capital goods, intermediate and other merchandise goods and non-monetary gold all fell on the month, partly offset by an increase in services imports.

Total imports rose 4.4 percent on the year in original terms in April, down from an increase of 9.6 percent in March, while seasonally adjusted year-on-year growth in import accelerated from 6.8 percent to 8.5 percent.

The 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.