Australia's trade surplus followed its narrowing trajectory of recent months coming in to a still very elevated $8.4bn in December. Strength in import spending was seen in December and over Q4 amid rising prices from supply constraints. Export earnings were lower through Q4 as iron ore prices declined, though rises in other key commodity prices lessened the headwind.
International Trade — December | By the numbers
- Australia's trade surplus narrowed by $1.4bn coming in at $8.4bn in December against $9.9bn expected. November's surplus was revised up to $9.8bn from $9.4bn previously.
- Exports increased by 0.8%m/m to $45.3bn to be 16.8% higher over the year.
- Imports posted a 5% rise in the month to $37.0bn for annual growth of 21.7%.
International Trade — December | The details
The narrowing in Australia's trade surplus from the record high in July extended to a 5th consecutive month. December's $8.4bn surplus was the lowest seen since March but remains at a historically elevated level. Over the December quarter, the nation's trade surplus came to around $29bn, down 21.6% on Q3's record high. Export earnings fell by 2.7% in the quarter, driven by weakness in non-rural goods (-4.6%q/q) as the nation's iron ore exports (-28.2%) reflected the retracement in prices for the commodity on global exchanges. Import spending in Q4 advanced by 4.3%, with the largest contribution by far coming from intermediate goods (11.2%) as supply chain pressures pushed up input prices.
In the December month, Australia's export earnings saw a modest rise of 0.8%. Rural goods (-3%m/m) eased from a record high in the prior month driven by other rural products (-7.3%m/m) and cereals (-1.5%m/m). The other categories saw offsetting gains. Non-rural goods (0.4%m/m) firmed on the back of a rebound in iron ore (12%m/m), though the other major commodities all declined (coal -14.2%, metals -2.3% and LNG -0.3%). Services exports lifted by 1.4% in the month but continue to remain at low levels impacted by the pandemic.
Monthly import spending followed up the 8.3% rise in November with a 5% lift in December. Consumption goods saw the fastest month-on-month rise (7.9%) in a couple of years, with vehicle imports up sharply (25.6%) and consistent with some easing of supply constraints in the automobile production sector. Capital goods posted a 2.6% increase in the month. This was driven by telecommunications equipment (13.8%), which has risen by 28.2% over the past 2 months, possibly reflecting price increases on the back of chip shortages. Intermediate goods saw another strong rise (5.5%), with fuel and a host of other inputs driving the rise as supply constraints push up prices. Services imports were modestly higher (0.5%) in December.
International Trade — December | Insights
Net exports contributed 1ppt to activity in the September quarter, attenuating the impact of the Delta lockdowns on GDP (-1.9%). This looks likely to reverse in Q4, with export earnings looking fairly weak. Import spending was up at a solid pace through the quarter, though rising prices due to supply constraints were a major factor.
