Australia: Trade deficit narrowed to $2.4bn in July - Westpac

Andrew Hanlan, Research Analyst at Westpac, notes that Australia’s trade deficit narrowed to $2.4bn in July, reversing the blow-out in June with exports surging by 2.8%, centred on a jump in gold while the imports fell by 0.4%.

Key Quotes

“For July, the trade deficit narrowed to $2.4bn, after a deficit of $3.25bn in June. The $840mn improvement in July fully reversed the deterioration the month prior. The headline result met our expectations (mkt median $2.7bn and Westpac $2.4bn), although the export / import mix provided some surprises.

Exports increased by 2.8%, a rise of about $720mn, exceeding our expectations for an increase of 0.5%. Gold led the way, jumping 62%, +$910mn to $2.4bn. This jump in gold, while likely to be partially reversed in August, is part of a strong uptrend. The gold sector is responding to higher prices in AUD terms. Indeed, gold volumes in the June quarter were some $4.9bn, a 23% increase on the average level in 2015 and a 34% lift on the levels prevailing in 2014. Metal ores was the other major mover in July, with export earnings down 4.7%, a fall of $280mn, a surprising result given that spot prices advanced in the month.

Imports declined in July, but the fall of 0.4% was less than anticipated and follows a 1.9% rise in June. Consumer goods did fall, -$510mn, largely unwinding the $590mn jump in June, as anticipated. However, much of the weakness in consumer goods was offset by broad based strength across the other categories, particularly intermediated goods, +$230m, centred on a near $300mn jump in fuel, notwithstanding weaker energy prices.”