International Trade — May | By the numbers
- Australia's trade surplus widened by $195.0m in May to $8.03bn, though it came in weaker than the $9.0bn level expected. April's surplus was revised down to $7.83bn from $8.8bn.
- Export earnings fell by a further 4.3% in May (after a sharp drop of 11.2% in April) to $35.74bn, extending the year-on-year decline from -6.9% to -15.1% to be at its weakest since February 2010.
- Import spending declined for a 5th straight month falling by 6.1% in May to $27.72bn, with the decline in annual terms steepening from -16.4% to -22.8% - its weakest on record.
International Trade — May | The details
Australia's trade surplus advanced by around $0.2bn in May to $8.03bn as imports contracted by 6.1% in the month (-22.8%yr) to outpace the fall on exports of 4.3% (-15.1%yr). This was the nation's second-largest monthly trade surplus on record and follows on from surpluses of $7.83bn in April and March's all-time high of $10.44bn.
On the export side, total credits weakened by 4.3% in May to $35.74bn — its lowest level since April 2018. This was driven by a 5.4% fall in goods exports (-12.0%yr) as rural goods rolled over (-10.1%mth), non-rural goods (-4.3%mth) extended the decline from the month prior and non-monetary gold did likewise (-11.6%mth). In nominal terms, the largest decline came from non-rural goods as coal (-$635m) and iron-ore (-$199m) shipments weakened. Services exports advanced by 1.6% in May due to a 3.0% rise from inbound tourism, likely reflecting spending by overseas students that were already in Australia before the international borders were closed to the world. Note inbound tourism plunged by 21.6% in April to reflect the impact of the border closure, so the overseas student population is helping to put a floor under this category.
Imports are being severely impacted by the combination of a very weak domestic economy and travel restrictions. Expenditure on imports has contracted in every month since the turn of the year with the level sliding to its weakest in 7 years at $27.72bn, while the pace of decline in annual terms is now at its fastest (-22.8%) since the ABS started collating these data in 1971. In May, consumption goods fell by 13.9% led by a collapse in vehicle imports (-47%), intermediate goods declined by 8.1% reflecting weaker oil prices and capital goods deteriorated by 6.9%. Services imports were broadly flat this month (-1.1%) but are down by 55.8% on a year ago. This reflects the effective shutdown of international tourism (-99.1%Y/Y) following the overseas travel ban.
International Trade — May | Insights
The trade surplus remained elevated in May but for the wrong reasons as imports fell at a faster pace than the contraction on exports. The impact of travel restrictions in response to the COVID-19 crisis has been much more severe on international tourism than tourism domestically due to the large population of overseas students, many of whom were reportedly already in Australia before the border closures were implemented. If these trends continue, net exports will be providing some offset to what will be a very severe decline in GDP in the June quarter.
