Australia's trade surplus moderated from a record high coming in at $12.2bn in September. This was the first narrowing seen since March, with the trade surplus pushing higher and higher over the period on the tailwinds from surging commodity prices.
International Trade — September | By the numbers
- Australia's trade surplus narrowed by $2.5bn in September to $12.2bn, broadly in line with consensus. August's record high surplus was revised down to $14.7bn from $15.1bn.
- Export earnings fell by 6.4%m/m to $45bn (prior: 3.6%m/m), slowing growth over the year to 33.3% from 46%.
- Import spending declined by 1.8% for the month to $32.7bn (prior: 1.8%m/m), with annual growth rising to 16.3% from 10.6%.
International Trade — September | The details
The nation's trade surplus narrowed for the first time in 6 months falling by $2.5bn in September. This saw the trade surplus decline from a record high in August to $12.2bn, though it was still the third largest on the ABS's records that date back to the early 1970s. Over the quarter, the trade surplus smashed all prior records elevating above $40bn, an increase of almost 30% from Q2. Exports were up 9.1% in Q3 despite a fall in iron ore (-1.8%) as prices rolled over from elevated levels. The heavy lifting was done by coal (47%) and other mineral fuels (38.4%) as energy prices across global exchanges surged. Imports posted a 2.3% rise in Q3, with intermediate goods the key contributor (7.8%). This looks to reflect the rise in input prices associated with the global supply chain shortages.
Export earnings were down by 6.4%m/m on the back of weakness in non-rural goods (-6.3%). This reflected a sharp fall in iron ore exports (-15.9%), with the ABS's estimates suggesting prices for the commodity were down by around 20-30% for the month. This was able to be partially offset by increases in coal (5.8%) and other mineral fuels (7.9%). Rural goods exports were around unchanged on the month (0.3%) and remain at record high levels. Global demand for many of Australia's rural commodities is high and the rise in prices means the sector is continuing to deliver a sizeable contribution to national income. Services exports (3.3%m/m) remain at very low levels due to the international border closure.
Import spending was down 1.8% in September, weighed by a sharp fall in consumption goods (-10.1%m/m). This may have been weakness associated with the domestic lockdowns, as imports of new vehicles plunged (-37.6%m/m). Partial offset came through from capital goods (6.9%m/m). Intermediate goods were little changed (-0.5%m/m) around record highs. Services imports lifted by 4.4%m/m but are roughly only at half the level that prevailed before the outset of Covid, largely due to the restrictions on offshore travel.
International Trade — September| Insights
Net exports were a sizeable drag on activity in Q2, taking 1ppt away from headline growth (0.7%). The Delta lockdowns are likely to see a contraction of around 3% for Q3 GDP, though net exports look like making a sizeable positive contribution to output and may be able to attenuate the magnitude of the decline to some degree. The terms of trade reached a record level in Q2 and appear likely to push higher again.