International Trade — June | By the numbers
- June's trade surplus was $A8.036bn and well ahead of the $6.0bn forecast by markets. May's initially reported surplus of $5.745bn was revised up to $6.173bn in today's release.
- Export earnings increased by 1.4% in June to a record $42.378bn, with growth over the year tracking at a strong 15.5% pace (prior rev: +4.2%m/m, +16.9%Y/Y)
- Import spending fell by 3.6% in the month to $34.342bn, which saw the annual rate turn negative to -1.3% (prior rev: +0.9%m/m, +2.2%Y/Y)
- The 3-month total for the trade surplus in the June quarter was $19.021bn, which the ABS estimates increases to $19.719bn after seasonal adjustments, or by 35.7% above Q1's surplus.
International Trade — June | The details
The trade surplus increased by $1.86bn over the month of June to the new record high mark of $8.036bn. That increase was the result of export earnings rising by $576m (+1.4%) and import expenditure declining by $1.29bn (-3.6%).
Starting with exports, total earnings lifted to their highest on record at $42.28bn in the month. That was driven predominantly by the non-rural goods category rising by $758m (+2.7%m/m), in which metal ores and minerals (mostly iron ore) contributed $554m reflecting higher prices and coal lifted by $232m on a rise in shipments. Over the year, earnings from metal ores and minerals are up in the order of 50% after iron ore prices escalated in response to supply disruptions caused by the tailings dam disaster in Brazil.
Meanwhile, services exports increased by a modest $26m (+0.3%) in June but have risen at a robust pace over the past year boosted by areas such as tourism from Asia and education. Rural goods earnings fell by $170m in June (-4.3%) reflecting weakness from cereals as drought conditions continue to impact. The normally volatile non-monetary gold category showed a contained move in June falling by $37m (-2.2%).
For imports, expenditure contracted at its sharpest monthly pace (-3.6%) since December of 2018 to a total of $34.342bn, which is 1.3% lower than a year earlier. June saw broad-based weakness across the categories; consumption goods -$450m (-5.1%), capital goods -$600m (-8.7%), intermediate goods -$366m (-3.3%) and services -$2m (0.0%). The result for consumption goods was impacted notably by weakness in vehicles (-$260m), while capital spending declined on falls from civil aircraft (-$307m) and industrial transport equipment (-$213m). The decline from intermediate goods can largely be explained by fuels and lubricants (-$367m) driven by lower oil prices.
International Trade — June | Insights
Strength in commodity prices continues to provide a tailwind for the domestic economy, with the terms of trade anticipated to show another decent rise in Q2. That will assist in boosting the Federal government's tax receipts and leaves the door open for further fiscal stimulus measures. That could well be needed given that the weak signals from imports in this report indicate that domestic demand continues to soften. However, looking towards Q2's GDP growth outcome, strength from commodities exports and weakness from imports suggests that net exports will add economic activity in the quarter.
