AU: Merchandise Trade

Wed Apr 04 20:30:00 CDT 2018

Consensus Actual Previous Revised
Level A$1.000B A$0.825B A$1.055B A$0.952B
Imports-M/M 0.4% -2.4%
Imports-Y/Y 11.7% 7.8% 9.1%
Exports-M/M 0.0% 4.3% 4.8%
Exports-Y/Y 3.3% 3.8% 4.8%

Australia's trade balance surplus narrowed from a revised A$952 million in January to A$825 million in February, falling short of the consensus forecast for a surplus of A$1.0 billion. Export growth weakened in February, mainly due to non-monetary gold, while imports growth strengthened. After a large trade deficit in December, the two surpluses at the start of the year suggest net exports will likely make a positive contribution to headline economic growth in the three months to March.

In seasonally adjusted terms, the value of exports were flat on the month in February at $34.23 billion, after increasing by a revised 4.8 percent in January. Weaker headline growth was almost entirely driven by a 23 percent drop in exports of non-monetary gold, which account for around 5 percent of total exports but can be volatile from month to month. Exports of non-rural goods (around 60 percent of total exports) were also slightly weaker on the month, though this was offset by a solid increase in exports of rural goods (around 15 percent of the total) and a small increase in services exports (around 20 percent). Year-on-year growth in total exports moderated from a revised 4.8 percent in January to 3.3 percent in February in original terms.

Seasonally adjusted imports advanced 0.4 percent on the month to A$33.41 billion in February, rebounding from a 2.4 percent decline in January. Imports of consumption goods, services, capital goods, and non-monetary gold all rose on the month, partly offset by a decline in imports of intermediate and other merchandise goods. Total imports increased 11.7 percent on the year in original terms in February, picking up from a revised increase of 9.1 percent in January.

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.