Australia's trade surplus $7.3bn in July

Australia's monthly trade surplus in July came back from its record high in the previous month as spending on imports outpaced a modest rise in export earnings. Data earlier this week showed the trade surplus surged to its highest on record in Q2 driven by an escalation in commodity prices, which saw the nation post its first surplus on current account since 1975. In yesterday's National Accounts, net exports led activity in Q2 with a 0.6ppt contribution to headline GDP growth of 0.5%.  

International Trade — July | By the numbers

• The trade surplus declined by $709m in July to $A7.268bn, though this was higher than the market's forecast for $7.0bn. June's trade surplus was revised down from $8.036bn to $7.977bn. 
• Export earnings increased by 0.6% in the month (+$270m) to $A42.538bn, with annual growth rising from 15.3% to 15.9% (prior rev: +1.4%m/m, +15.3%Y/Y) 
• Import expenditure rebounded by 2.9% in July (+$979m) to $A35.270bn coming off a 3.5% fall in June, which swung the annual pace from -1.5% to +0.9%.

International Trade — July | The details 

On the exports side, total earnings lifted only modestly in July by 0.6%, or by $270m in nominal $AUD terms. The breakdown showed this was driven by the volatile non-monetary gold component (+66%, $1.09bn). This was moderated mostly by a 3% decline (-$807m) in non-rural goods that was centred on weakness in commodities with; coal -$571m, metals -$415m and metal ores -$89m, with the ABS's estimates pointing to softness from prices and volumes. However, LNG was still going strongly with earnings up by $214m on strength in prices and volumes. Meanwhile, rural goods fell by 1% (-$42m) in the month. Services exports were little changed in July rising by $38m. 

For imports, the 2.9% rise equated to a nominal increase in expenditure of $979m, which also likely includes some pass-through from a weaker Australian dollar in 2019. The increases were across; intermediate goods (driven by higher oil prices) (+5%, $541m), consumption goods (mainly due to vehicles) (+4%, $378m), and non-monetary gold (+29%, $177m). Some offset came from capital goods (-1%, $87m) and services 0%, -$30m).    

  

International Trade — July | Insights 

This was another very strong monthly trade surplus to start Q3 and was around $1.0bn above the average from Q2. However, the recent retracement in commodity prices is expected to see trade surpluses moderate in the months ahead, as well as the impact of a weaker dollar lifting import prices. From a voulme perspective, resources exports are expected to add notably to economic activity over the second half of 2019.