JP Morgan: Australian Trade Deficit Has Widened

Australia’s trade balance remained in deficit in September for the fifth straight month. The deficit widened to A$1.8 billion, though by less than we and the market had expected (J.P. Morgan –A$2.5bn, consensus –A$2.15bn).

For graphs pertaining to this article please see the following document: (http://img.scoop.co.nz/media/pdfs/0911/JP_Morgangraph_115.doc).

Imports rose 5%m/m in September, essentially in line with the 6% expansion we had penciled in following the release of the preliminary data. The increase was predominantly from goods, which were up 6.4%; service imports ground out a more modest 1% gain. Within merchandise trade, both capital and consumption goods imports were somewhat soft in September, rising just 2%.

Further, demand in both of these sectors appears to have been underpinned by transport equipment. On the consumption side, imports of non-industrial transport equipment jumped 15%, while industrial transport equipment was up 28%. Following the automotive theme, parts for transport equipment, and fuels and lubricants were significant contributors to the intermediate and other goods category. On the ABS’ preliminary analysis, it appears that import volumes increased 4.4% over 3Q, which is somewhat surprising given yesterday’s weak retail volumes number.

Exports similarly were up 5% over the month. Non-rural goods, in particular coal, coke and briquettes were up (2% and 9% respectively). Rural goods were down 4% on the other hand, due to lower exports of cereal grains, and cereal and meat preparations (each down approximately 10%). Exports continue to prove resilient to solid AUD appreciation over the second half of the year. Arguably this resilience is because AUD strength already incorporates stronger demand for Australian commodities associated with the rapid growth of the Asian manufacturing and construction sectors.

Finally, non-monetary gold continues to be an important, although volatile swing factor. Increases in gold prices, and increased flows owing to global inflation concerns, pushed up the value of gold imported by 33%, and similarly bolstered exports by a massive 64%.

ENDS

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