Australia's trade surplus came in further in August, defying expectations for a rebound after narrowing sharply in July. Export earnings saw a modest rebound but were outpaced by rising imports reflecting inflationary effects and robust demand.
International Trade — August | By the numbers
- Australia's trade surplus came in at $8.3bn in August (vs $10bn expected), narrowing by a further $0.6bn following a sharp $8.5bn retracement in July.
- Exports were up 2.6% in August at $56.8bn, partially rebounding from July's 10.4% fall.
- Imports advanced by 4.5%m/m to $48.5bn, broadly in line with the increase in the month prior (4.8%).
International Trade — August | The details
The monthly trade surplus was slightly narrower in August (-$0.6bn) after falls in major export commodity prices and disruptions to shipments led to a sharp pullback in July (-$8.5bn). These outcomes left the trade surplus at $8.3bn in August, its lowest since February but still at a historically elevated level. The narrowing of the trade surplus in August was driven by imports (4.5%) outpacing the increase in exports (2.6%).
On the export side, the increase in August was broad based with all categories rising. The largest contribution came from non-rural goods (2.1%) as coal (2.9%) and other mineral fuels (mainly LNG) (3.1%) partially rebounded from large falls in July on the back of increased shipments (though LNG prices also lifted modestly). Iron ore exports stabilised (-0.2%) after falling almost 13% in July.
Rural goods continued to advance (6.4%) and are up strongly over the year (39.5%), benefitting from heavy rainfall in Australia boosting production, robust demand offshore and rising prices, notably for wheat amid the supply impacts from the Ukraine war. Accordingly, cereal exports have risen almost 56% over the year, while meat exports are up more than 20%.
The services sector recovery continued, albeit with a modest rise in August (0.4%). Tourism-related earnings consolidated after a sequence of strong increases following the full reopening of the international border.
For imports, spending on both goods (4.8%) and services (2.9%) advanced to drive the headline rise (4.5%). Consumption goods followed up a strong rise in July with a 7.1% lift in August. Of note, non-industrial transport equipment (vehicles) imports have risen sharply over the past two months (37%), pointing to eased global supply chain pressures.
Intermediate goods lifted materially in the month (6.6%), largely driven by fuel imports (11.1%) on the back of high prices. Total fuel imports hit $6.9bn in August, a new record high.
Services imports were up 2.9% in August, nearly doubling over the year (95.1%) driven by the easing of Covid travel restrictions. Tourism-related spending on overseas travel is seeing a strong recovery but is still down by around 40% on pre-Covid levels at the end of 2019. Strong demand and high fuel prices have seen spending on transport rise by almost 130% over the year.
International Trade — August | Insights
Global demand for Australian commodities continues to underpin elevated trade surpluses, despite a recent pullback in prices. Imports are up by more than 40% over the year, partly reflecting rising prices, most notably for fuel, but also robust domestic demand conditions.