AU: Merchandise Trade

Mon Feb 05 18:30:00 CST 2018

Consensus Actual Previous Revised
Level A$0.100B A$-1.358B A$-0.628B A$0.036B
Imports-M/M 6.0% 1.5% 1.0%
Exports-M/M 1.6% 0.4% 0.5%
Imports-Y/Y 10.4% 8.7% 8.4%
Exports-Y/Y -6.2% -0.1% 0.0%

Australia's trade balance shifted from a revised surplus of A$36 million in November (revised from a deficit of A$628 million) to a deficit of A$1.358 billion in December, far from the consensus forecast of a surplus of A$100 million. This is the first monthly trade deficit since April and the largest since August 2016, reflecting both weak exports growth and a stronger increase in imports.

In seasonally adjusted terms, the value of exports rose 1.6 percent on the month in December to around $32.47 billion, up modestly from A$31.96 billion in November. Exports of non-rural goods (around 60 percent of total exports) recorded solid growth in December, but this was largely offset by declines in exports of services (around 20 percent), rural goods (around 15 percent), and non-monetary gold. Year-on-year growth in total exports weakened from no change in November to a drop of 6.2 percent in December in original terms.

Seasonally adjusted imports advanced to A$33.82 billion in December, up 6.0 percent from A$31.92 billion in November. Imports of consumption goods, intermediate and other merchandise goods, capital goods, and non-monetary gold all recorded strong gains, while services imports rose slightly. Total imports increased 10.4 percent on the year in original terms in December, picking up from an increase of 8.4 percent in November.

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.