AU: Merchandise Trade

Wed Dec 06 18:30:00 CST 2017

Consensus Actual Previous Revised
Level A$1200M A$105M A$1.745M A$1604M
Imports-M/M 1.9% 0.2% 0.2%
Exports-M/M -2.8% 2.9% 2.7%
Imports-Y/Y 8.1% 5.5% 5.4%
Exports-Y/Y 11.1% 16.1% 16.1%

Australia's trade surplus narrowed sharply from a revised A$1.604 billion in September to just A$105 million in October, well below the consensus forecast of A$1.2 billion. This is the smallest trade surplus since April, with a drop in exports accompanied by stronger growth in imports.

In seasonally adjusted terms, the value of exports fell 2.8 percent on the month in October to around $31.87 billion, down from A$32.77 billion in September. This decline reflects weaker exports of non-rural goods (around 60 percent of total exports), services (around 20 percent), and rural goods (around 15 percent), partly offset by an increase in exports of non-monetary gold. Using original data, the drop in non-rural goods exports in October was largely driven by a decline in both volumes and unit prices for iron ore exports, as well as lower volumes of coal exports. Year-on-year growth in total exports slowed from 16.1 percent in September to 11.1 percent in October in original terms.

Seasonally adjusted imports advanced to A$31.77 billion in October, up 1.9 percent from A$31.17 billion in September. Imports of consumption goods, intermediate and other merchandise goods, non-monetary gold, and services increased on the month, offset by a decline in imports of capital goods. Total imports increased 8.1 percent on the year in original terms in October, up from an increase of 5.4 percent in September.

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.