AU: Merchandise Trade

Wed Jul 05 20:30:00 CDT 2017

Consensus Actual Previous Revised
Level A$0.7B A$2.47B A$0.56B A$0.09B
Imports-M/M 0.7% -0.6% -0.4%
Exports-M/M 8.5% -8.3% -7.5%
Imports-Y/Y 10.6% 4.4% 4.8%
Exports-Y/Y 24.7% 17.6% 15.8%

Australia's trade surplus widened to A$2.47 billion in May from A$0.09 billion in April (revised from A$0.56 billion), well above the consensus forecast of A$0.7 billion. This is the seventh consecutive monthly trade surplus, with a rebound in coal exports after weather-related disruptions driving much of the increase.

In seasonally adjusted terms, the value of exports rose 8.5 percent on the month in May to around $32.78 billion, up from A$30.20 billion in April. This increase reflects a rebound in exports of non-rural goods (around 60 percent of total exports). These fell sharply in April, partly due to the impact of cyclone damage to port infrastructure that had disrupted coal exports, but rose by 12.7 percent in May as these exports resumed. Exports of services (around 21 percent of the total), rural goods (around 13 percent) and non-monetary gold (around 5 percent) also rose by around 1.0-3.0 percent on the month.

Year-on-year growth in total exports picked up from from 15.8 percent in April to 24.7 percent in May in original terms.

Seasonally adjusted imports rose 0.7 percent on the month in May to A$30.31 billion, up from A$30.11 billion in April. Imports of consumption goods, intermediate and other merchandise goods, and services all rose on the month, partly offset by declines in imports of capital goods and non-monetary gold.

Total imports increased 10.6 percent on the year in original terms in May, up from an increase of 4.8 percent in April.

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.