For the second straight month, Australia’s trade balance came in below market expectations as the pace of spending on imports outpaced growth in income generated by the export of goods and services. Still, the nation's trade surplus is tracking at a strong level averaging around $2bn per month in the 4th quarter, although this is following a very strong result in Q3 where the average was around $2.2bn per month.
International Trade — November | By the numbers
- Australia’s trade surplus narrowed by $88m in November to $A1.925bn, which was below the market forecast for a surplus of $2.2bn. On revision, October’s initially reported surplus of $2.316bn was lowered to $2.013bn
- Export income increased by $532m, or by 1.4%, in November to $A38.445bn
- The value of goods and services imported increased by a stronger $620m, or by 1.7%, in the month to a total of $A36.520bn
International Trade — November | The details
Focusing on the export side, income generated increased by $532m (+1.4%) in November to a new record-high figure of $38.445bn. Breaking this down further, 'goods' exports contributed $475m to the overall increase in the month and services added the remaining $57m.
In terms of goods exported, it was a sharp rise from non-monetary gold of $681m that accounted for the overall $475m increase. Non-rural goods fell by $173m, which was impacted by a sharp fall from coal (-$543m) reflecting weaker shipment volumes in hard coking and thermal coal. There was some offset from metal ores and minerals (+317m) in spite of weakness in iron-ore, while the value of LNG exports continue to rise, incresing by a further $96m to a new record of $4.56bn.
The value of rural goods (meat, cereals and wool etc) exported fell by $34m to $3.738bn, which is around 0.6% lower compared to the level a year earlier, with drought conditions impacting the nation's agriculture sector.
For services, tourism provided a lift of $43m in November to $5.632bn, and 'other services' (such as business services) increased by $14m to $2.064bn.
On the other side of the equation, spending on imports increased by $620m (+1.7%) to $36.520bn. This increase was led by a sharp rise in capital goods of $433m, which follows a $502m rise in the previous month. Capital goods relate to business investment in items such as machinery and industrial equipment, telecommunications, and transport. Recent data have pointed to an improving trend in business investment led by the non-mining sectors of the economy. Consumption goods imported lifted by $202m in the month, driven by non-industrial transport ($140m) and consumable goods ($71m).
There were modest declines from intermediate goods (-$22m), though fuel was a notable drag (-$145m) following sharp declines in global oil prices over recent months, and services (-$22m).
From a foreign exchange perspective, ABS data showed the Australian dollar lifted by around 2% against the US dollar and by around 1.9% on a broader trade-weighted basis in November. Though when compared to a year earlier, the domestic currency has fallen by around 5% against the US dollar and by around 2.3% in trade-weighted terms.
International Trade — November | Insights
In Q3, net exports added a fairly strong 0.3ppt to overall activity helping to underpin growth in the domestic economy. While the trade surplus remains strong, it is tracking at a lower level compared to Q3 pointing to the possibility of a lower contribution from international trade to GDP growth in Q4, particularly given lower export volumes for coal and iron-ore. However, December's data are still to come and this could improve the outlook.
