Australia's trade surplus widened to an 8-month high of $13.9bn in February. Weaker demand conditions and goods disinflation have hit import spending, which saw its sharpest monthly fall since 1984. Export earnings are off the highs from the middle of last year as commodity prices have eased but are still elevated.
International Trade — February | By the numbers
- Australia's trade surplus increased to $13.9bn in February from $11.3bn in January (revised lower from $11.7bn). A slight narrowing to $11.2bn was expected.
- Exports declined by 2.9% to $57bn (12.2%yr), pulling back from a 1.4% lift in January.
- Imports slumped 9.1% coming in at $43.2bn (-0.5%yr), more than reversing January's 5.5% increase.
International Trade — February | The details
Import spending plunged by 9.1% — its sharpest month-on-month fall since April 1984 — driving a $2.6bn widening in the trade surplus in February. Export revenue also declined in the month (-2.9%). February's trade surplus was the third highest on record at $13.9bn, but the weakness in imports is broadly reflective of softer domestic demand conditions as spending has lost momentum against headwinds from RBA rate hikes and cost-of-living pressures.
The heavy fall in imports came across both goods (-9.9%) and services (-5.4%). That profile reflects weaker demand with the post-Covid rebound having faded and eased supply chain pressures contributing to falling goods prices. Consumption goods (-19.9%) backslid to their lowest since January-22 on broad-based category falls, including vehicles (-35.1%) and clothing and footwear (-9.2%).
Capital goods fell sharply (-14.6%), albeit after rising strongly in December (12.5%) and January (10%), driven by transport (-38.6%) and telecommunications equipment (-27.3%). Lower input prices and weaker demand continue to weigh on intermediate goods (-1%), falling to a 10-month low. The rebound in international travel continues, though it has lost some momentum of late, which has weighed on services imports.
Exports (-2.9%) fell for the 4th time in the past 5 months. Unlike imports, this weakness has been driven entirely by goods, with those exports down a further 3.4% in February. Non-rural and rural goods have been the driving factor as prices for Australian export commodities have come off very elevated levels.
In February, non-rural goods fell 4% on the back of a slide in iron ore exports (-9.5%), though rural goods bounced (3.4%) to stem a run of declines. Services exports increased for the 16th month running, though February's 0.5% lift was the slowest rise in a year. Inbound tourism is still down 24% on end-2019 levels of spending.
International Trade — February | Insights
Although the trade surplus widened significantly, this reflected underlying weakness in imports that is consistent with the slowing seen in domestic demand, which stalled in Q4 (see here). Falling goods imports are also providing an indication that the declines in goods prices seen in other countries as supply chain pressures have eased are starting to flow through to Australia. While commodity prices have retraced, export revenue remains very elevated.