AU: Merchandise Trade

Wed May 02 20:30:00 CDT 2018

Consensus Actual Previous Revised
Level A$1.0B A$1.527B A$0.825B A$1.349B
Imports-M/M 0.9% 0.4% 0.1%
Exports-M/M 1.4% 0.0% 0.7%
Imports-Y/Y 4.7% 11.7% 10.5%
Exports-Y/Y 4.0% 3.3% 3.9%

Australia's trade balance surplus widened from a revised A$1.349 billion in February to A$1.527 billion in March, above the consensus forecast for a surplus of A$1.0 billion and the largest surplus since May 2017. Exports out-grew imports on the month and also recorded a solid increase in year-on-year growth.

In seasonally adjusted terms, the value of exports advanced 1.4 percent on the month to A$34.84 billion, after increasing by a revised 0.7 percent in February. Exports of rural goods (around 15 percent of total exports) recorded solid growth in March on the month, with moderate gains also recorded for exports of non-rural goods (around 60 percent of the total) and services (around 20 percent). There was also a sharp rebound in exports of non-monetary gold, which account for around 5 percent of total exports but can be volatile from month to month. Year-on-year growth in total exports picked up slightly from a revised 3.9 percent in February to 4.0 percent in March in original terms.

Seasonally adjusted imports rose 0.9 percent on the month to A$33.31 billion in March after a revised increase of 0.1 percent in February. This headline increase, however, was largely driven by a very sharp rebound in imports of non-monetary gold, with imports of intermediate and other merchandise goods also rebounding after a decline in February. Other major categories of imports - consumption goods, capital goods and services - all fell on the month in March. Total imports increased 4.7 percent on the year in original terms in March, slowing from a revised increase of 9.1 percent in February.

In quarterly terms today data shows a swing in the trade balance from a deficit of A$1.3 billion in the three months to December to a trade surplus of A$4.0 billion for the three months to March, indicating that net exports will make a solid positive contribution to headline economic growth. Officials at the Reserve Bank of Australia expect external demand to help drive a pick-up in growth over 2018.

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.