AU: Merchandise Trade

Wed Mar 07 18:30:00 CST 2018

Consensus Actual Previous Revised
Level A$-0.200B A$1.055B A$-1.358B A$-1.146B
Imports-M/M -2.4% 6.0% 6.2%
Exports-M/M 4.3% 1.6% 1.7%
Imports-Y/Y 7.8% 10.4% 9.8%
Exports-Y/Y 3.8% -6.2% -6.2%

Australia's trade balance shifted from a revised deficit of A$1.146 billion in December to a surplus of A$1.055 billion in January. This is above the consensus forecast for a small deficit and the biggest surplus since September, reflecting both a pick-up in exports growth and weaker imports growth.

In seasonally adjusted terms, the value of exports rose 4.3 percent on the month in January to around $33.92 billion, after increasing by 1.7 percent in December. Exports of non-rural goods (around 60 percent of total exports) made the biggest contribution to headline growth, with exports of non-monetary gold (just over 5 percent) also up strongly and services exports 9( around 20 percent) up slightly. In contrast, exports of rural goods (around 15 percent of the total) fell in January. Year-on-year growth in total exports rebounded from a drop of 6.2 percent in December to an increase of 3.8 percent in original terms.

Seasonally adjusted imports declined 2.4 percent on the month to A$32.87 billion in January, after increasing by 6.2 percent in December. Imports of consumption goods, intermediate and other merchandise goods, capital goods, and non-monetary gold all fell on the month, partly offset by a slight increase in services imports. Total imports increased 7.8 percent on the year in original terms in January, slowing from an increase of 9.8 percent in December.

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.