AU: Merchandise Trade

Thu Jan 04 18:30:00 CST 2018

Consensus Actual Previous Revised
Level A$0.5B A$-0.628B A$105B A$-0.302B
Imports-M/M 1.5% 1.9% 1.9%
Exports-M/M 0.4% -2.8% -2.7%
Imports-Y/Y 8.7% 8.1% 6.2%
Exports-Y/Y -0.1% 11.1% 10.1%

Australia's trade balance fell from a revised deficit of A$302 million in October (revised from a surplus of A$105 million) to a deficit of A$628 million in November, well short of the consensus forecast of a surplus of A$500 million. The move into deficit over the last two months follows eleven consecutive months of trade surpluses.

In seasonally adjusted terms, the value of exports rose 0.4 percent on the month in November to around $31.85 billion, up modestly from A$31.71 billion in October. Although there was solid growth in exports of non-rural goods (around 60 percent of total exports) and services (around 20 percent), as well as a more moderate increase in exports of rural goods (around 15 percent), these gains were largely offset by a sharp decline in exports of non-monetary gold. Year-on-year growth in total exports slowed from an increase of 10.1 percent in October to a fall of 0.1 percent in November in original terms.

Seasonally adjusted imports advanced to A$32.48 billion in November, up 1.5 percent from A$31.85 billion in October. Imports of consumption goods, intermediate and other merchandise goods, capital goods, and services increased on the month, offset by a decline in imports of non-monetary gold. Total imports increased 8.7 percent on the year in original terms in November, up from an increase of 6.2 percent in October.

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.