International Trade — August | By the numbers
- The nation's trade surplus weakened by $1.327bn in August to $A5.926bn to come in slightly below the median forecast of $6.0bn. July's trade surplus was revised down to $7.253bn from the $7.268bn total initially reported by the ABS.
- Export earnings fell by 3.4% in August (-$1.464bn) to $40.982bn, slowing the annual pace of growth to 10.1% (prior rev: +0.4%m/m, +15.6%Y/Y)
- Import spending softened by 0.4% in the month (-$137m) to $35.056bn to be virtually flat over the year at 0.2% (prior rev: +2.5%m/m, +0.7%Y/Y)
International Trade — August | The details
Export earnings fell by $1.464bn ($A nominal terms) or by 3.4% in August to $40.982m; taking it back to its level of April-May. By percentage terms, this was the sharpest monthly contraction since April 2017, and while the annual pace was still strong at 10.1% it slowed noticeably from 15.6% last month. Leading the decline was the non-rural goods category with a 3.5% fall (-$971m). In the main, this reflected the impact of a weakening in iron ore prices with earnings from metal ores and minerals down by 10% (-$1.217bn). For the other major commodities, coal exports fell by 4% (-$241m) and other mineral fuels (including LNG) lifted by 10% ($470m). Despite the impact of drought conditions, rural goods lifted by 1.4% (+$51m) to slightly offset last month's decline, though earnings are down by 9.6% on a year earlier. A 65.8% surge in volatile non-monetary gold exports in July was only partially unwound in August, declining by 22.0% (-$601m). Services exports firmed by 0.6% in August (+$53m) to be up 6.9% through the year, with inbound tourism contributing the bulk (+39m) of this increase.
On the import side, August's bill fell by 0.4% or $137m on the previous month to $35.056bn. From a year earlier, import expenditure is up by just 0.2% dampened by the pass-through from an Australian dollar that declined in the order of 7.7% against the US dollar over this time. However, weak private sector demand conditions are also key, as highlighted by the recent national accounts for Q2 (see here). August's decline was consistent with this theme, with capital goods down by 1.9% (-$115m) and consumption goods falling by 0.9% (-$76m). Annual growth in capital goods has fallen to -11.9% from 13.3% a year ago, while for consumption goods the pace is 0.7% from 6.9% in August 2018. Intermediate goods posted a 3.8% fall in the month (-$424m) that was mainly attributable to a 7% slide ($-241m) from fuels and lubricants reflecting weaker prices. Service imports lifted by 1.9% in August ($164m) led by maintenance and repairs.
International Trade — August | Insights
The market was accurate in its forecast for the trade surplus to moderate to the vicinity of $6bn reflecting the impact of declining iron ore prices. Since August's lows, iron ore prices recovered slightly over September. Next month's trade surplus might be on track for an outcome similar to today's. Commodity exports are still running at highly elevated levels, while weakness continues to be evident in imports. Net exports added 0.6ppt to activity in Q2 and at this stage appear likely to make another solid contribution in Q3.
