Australian Trade Deficit Shocker After Surplus Expected

Commodities and the Australian dollar have been on a tear leading into the November Trade balance for Australia. The result was a shocker, surplus of AUD 550 mil was expected, a deficit of  AUD  -628 mil reported.

Commodities and the Australian dollar have been on a tear leading into the November Trade balance for Australia. The result was a shocker, surplus of AUD 550 mil expected, a deficit of  AUD -628m  reported. A reminder that the market is ahead of itself. 

Australian Balance of Trade Nov 2017Source: ABS

Futhermore October’s trade report received similar treatment . October’s surplus of AUD 105 mil was revised to a deficit of AUD -320 mil.

The change in November came from a 1% rise in imports, or AUS 467 mil, with exports flat over October. Falling prices in key exports contributed to the surprise. Though it should be noted that the price of iron oren has since rallied.  

Exports saw a two per cent rise in non-rural goods such as iron ore help offset a fall in cereals and grain. There was also a 23 per cent drop in non-monetary gold exports. Coal, coke and briquettes fell around 2% as China’s clean air focus weighed on thermal coal volumes.

The demand for LNG exports with additional capacity coming on stream with pricing firming is a positive as is the increasing demand from Asia for Australian services.  

The result will have an impact on the RBA and it’s rationale as it will impact growth numbers.

The dissappointment comes from the effectively flat export numbers despite booming commodities. The positive spin is that capital goods imports were behind the import rise, aviation and telecommunications equipment leadithe gains. This should be reflected in higher capex numbers. With iron ore prices rising and coal demand improving this should be a positive for Australia. 

At the time of writing the AUD response was fairly muted falling from .7868 to .7844, a mere 22 pips. The weaker tone of the USD hampering any heavier sales it appears. Keep an eye on RBA and major exporter commentary going forward. 

Source: Australian Bureau of Statistics

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