Australia's trade surplus retraced from record highs to come in at $8.7bn in July. Exports fell for the first time since November 2021 as global commodity prices eased while import spending advanced strongly, partly reflecting global inflationary pressures as well as a resurgence in services spending with overseas travel recovering rapidly.
International Trade — July | By the numbers
- Australia's trade surplus narrowed to $8.7bn in July from $17.1bn in June, sharply lower than anticipated by markets ($14.7bn).
- Exports retraced from record highs falling by 9.9%m/m to $55.3bn, the level still 18.2% higher over the year.
- Imports advanced by 5.2%m/m to $46.5bn, with annual growth in spending elevating to 40.8% from 34.3%.
International Trade — July | The details
The nation's trade surplus reset to record highs in May ($14.6bn) and then in June ($17.1bn) before pulling back sharply in July ($8.7bn), still a very elevated level in a historical context. The narrowing in the trade surplus was driven by lower exports earnings and rising spending on imports.
Exports increased for 8 months running between November and June, continually resetting to record highs over this period. That run came to an end in July, with exports retracing by 9.9%. In nominal terms, export earnings were $6.1bn lower than in June, coming in at $55.3bn. Non-rural goods fell by 11.9%, accounting for almost 90% of the monthly decline in exports. This came on the back of falls in iron ore (-14.9%m/m), coal (-17.4%m/m) and LNG (-4.4%), the result of falling prices and/or lower export volumes.
Supporting exports were rural goods (3.5%) and the services sector (4.0%). Cereals surged by over 10% to lead rural goods higher, as production continued to recover from disruptions caused by heavy rainfall. The full reopening of the international border has seen the recovery in the services sector shift up a gear. Tourism-related earnings lifted by 7.3%m/m to be up by 74.6% over the year.
For imports, spending lifted for a 3rd consecutive month with a 5.2% rise posted in July, partly driven by inflationary effects. Consumption goods made the largest contribution, rising by 9.1%m/m. Spending on new vehicles (15.4%) and clothing and footwear (16.7%) lifted strongly. Capital goods (5.0%) and intermediate goods (2.0%) strengthened in July. However, the story for imports centres on the services sector; spending was up by a further 8.1% in the month to be 91.7% higher over the year. Tourism-related spending is rising rapidly with overseas travel now occurring more widely, though it is still 32% below pre-pandemic levels.
International Trade — July | Insights
Falling commodity prices contributed to a sizeable pullback in the trade surplus in July. Following an acceleration in prices in response to the war in Ukraine, prices for many commodities have eased more recently. Yesterday's national accounts reported the terms of trade had lifted to a record high level in Q2, driving a surge in national income. Activity in services trade is seeing a strong recovery with travel restrictions recently removed, particularly on the import side.
