Australia's trade surplus elevated to a record high level in January at $10.1bn, widening by $3bn in the month driven by strength in iron ore exports as prices for the commodity continued to elevate on improving global economic conditions.
International Trade — January | By the numbers
- Australia's trade surplus widened by $3.0bn in January to a record high of $10.1bn; well ahead of the median estimate of $6.9bn. December's trade surplus was revised up to $7.1bn from $6.8bn.
- Export earnings posted their strongest increase in 10 months with a 6.2% rise coming through in January to $39.8bn; the annual pace turning positive on the result to 2.9% from -7.6%.
- Import expenditure declined by 0.8% in December and was softer again in January, falling 2.3% to $29.7bn (-12.6%yr).
International Trade — January | The details
January's $10.1bn trade surplus established a new record high surpassing the previous peak of $9.6bn from March 2020. This was $3.0bn higher than the trade surplus in December, with the key dynamics being an acceleration in export earnings as import spending weakened. For exports, earnings accelerated by their fastest pace since last March rising by 6.2% (or $2.3bn) in the month to $39.8bn. The major driver was non-rural goods, which soared 10.3% month on month ($2.6bn), coming in just below $28bn. Within the category, shipments of metal ores and minerals (mainly iron ore) accelerated by 14.2% ($2.0bn) to $16.1bn as prices for the key commodity elevated in global markets.
In the other categories, rural goods were flat in January after trending higher over the second half of 2020. Services exports declined 2.9% in January to be 39.3% lower over the year reflecting to hit to tourism from the travel restrictions, while non-monetary gold pulled back by 5.1% in the month.
Imports on aggregate contracted by 2.3% (-$0.7bn) in January to $29.7bn to be down 12.6% over the year. However, spending on imports was coming off solid gains over the final two quarters of 2020 in response to the strength of the Australian economy during the reopening phase, driven by consumption and capital goods. There was some softening of this strength in January with consumption goods down 3.3% (-$0.33bn) to $9.5bn and capital goods broadly flat (-0.3%) at $6.5bn. Intermediate goods declined 2.4% (-$0.2bn) on broad-based weakness across the category. Meanwhile, service imports lifted a touch in January (0.5%) but were nearly 54% lower than a year earlier due to international travel being prohibited.
International Trade — January | Insights
Yesterday's national accounts for the December quarter reported a rise in the terms of trade of 4.8% in Q4, and surging iron ore prices look to have continued to deliver tailwinds for national income at the start of 2021.
