AU: Merchandise Trade

Wed Aug 02 20:30:00 CDT 2017

Consensus Actual Previous Revised
Level A$1.7B A$0.86B A$2.47B A$2.02B
Imports-M/M 2.4% 0.7% 0.2%
Exports-M/M -1.4% 8.5% 7.2%
Imports-Y/Y 6.5% 10.6% 10.3%
Exports-Y/Y 22.8% 24.7% 22.5%

Australia's trade surplus narrowed to A$856 million in June from A$2.02 billion in May (revised from A$2.47 billion), below the consensus forecast of A$1.7 billion. Weaker commodity prices were a major factor driving the decline in the surplus, with the value of iron ore and coal exports in particular down sharply on the month.

In seasonally adjusted terms, the value of exports declined 1.4 percent on the month in June to around $31.78 billion, down from A$32.22 billion in May. This drop reflects weaker exports of non-rural goods (around 62 percent of total exports) and services (around 19 percent of the total), partly offset by an increase in exports of rural goods (around 13 percent of the total) and non-monetary gold (around 6 percent of the total).

Year-on-year growth in total exports picked up from 22.5 percent in May to 22.8 percent in June in original terms.

Seasonally adjusted imports rose 2.4 percent on the month in June to A$30.92 billion, up from A$30.19 billion in May. Imports of capital goods, consumption goods, intermediate and other merchandise goods, and services all rose on the month, partly offset by a small decline in imports of non-monetary gold.

Total imports increased 6.5 percent on the year in original terms in June, down from an increase of 10.3 percent in May.

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.