Australia's trade surplus widened more sharply than expected in October to $7.465bn, taking it back to its level from mid-year. The key was a strong advance in export earnings as the value of iron ore shipments hit a record high while imports were broadly stable after falling noticeably in the month prior.
International Trade — October | By the numbers
- Australia's trade surplus increased by $1.641bn in October to $7.456bn, well clear of the median estimate situated at $5.8bn. September's initially reported surplus of $5.63bn was revised up to $5.82bn.
- Export earnings advanced by 5.4%m/m to $35.72bn following on from a 2.6% rise in September (revised from 3.9%), slowing the annual decline to -11.7% from -20.2%.
- Imports consolidated with a modest 0.6% rise to $28.26bn after contracting by 6.5% in September, leaving the annual pace at -21.3% from -22.2%.
International Trade — October | The details
The nation's trade surplus had stepped lower since June reflecting a rise in imports as domestic demand conditions improved on the reopening of the economy. It then lifted in September as import spending pulled back and exports increased modestly. As export earnings improved at a faster pace in October, the trade surplus has been restored to around its level from mid-year.
On the export side in October, earnings increased by 5.4% to $35.72. Driving this was an 8.4% rise from non-rural goods (-2.1%yr), which boosted earnings by $1.94bn as the export of metal ores and minerals (predominantly iron ore) elevated by 14% to a record high level ($13.97bn). The ABS's detailed breakdown indicated this mainly reflected increased shipment volumes. Rural goods increased by 8.2% in the month ($0.26bn) on broad-based gains across the category. Volatile non-monetary gold pulled back this month (-16.1%) after surging by nearly 72% in September. In services, earnings were 0.5% softer at $5.18bn after falling precipitously earlier in the year on the introduction of the international border closure to help contain the pandemic.
For imports, total spending was a touch firmer in October rising by 0.6% ($0.18bn) to $28.26bn (-21.3%yr). All categories increased but the gains were modest with consumption up 1.6% support by new vehicles, capital goods 1.6% higher on telecommunications equipment and intermediate goods posting a 1.7% lift. Services imports were little changed (0.4%) and remain around their level from earlier in the year after the introduction of the overseas travel ban saw spending in the category plunge.
International Trade — October | Insights
The month to month trade flows remain volatile during this pandemic episode. Over September-October, the trade surplus lifted by $4.44bn, but in the two months prior to that period it fell by $4.38bn. Import spending rebounded on the reopening of the economy and this was reflected by net exports subtracting 1.9ppts from GDP growth in yesterday's national accounts for Q3 (see here). Today's report pointed to a moderation in import spending with exports starting to pick up.
