Australia's goods trade surplus narrowed to a 6-month low of $4.6bn in September, a below expected figure ($5.3bn) and down from $5.3bn in August (revised from $5.6bn). Lower commodity prices continued to weigh on exports, posting their largest decline in 15 months (-4.3%) to be down more than 10% over the year. Imports also fell through the month (-3.1%), swinging annual growth from 3.2% to -7.8% - its weakest pace since the start of 2024. The overall dynamics are Australian dollar negative; a weakening terms of trade - export prices (-4.3%q/q, -6.8%Y/Y) are falling by more than import prices (-1.4%q/q, -1.1%Y/Y) - is compressing the trade surplus.
September's trade surplus of $4.6bn was the narrowest since March, with the Bureau also revising lower its estimates of the surpluses reported over recent months. As a result, the 3-month average for the trade surplus came in at $5.1bn for the September quarter, its equal lowest since Q4 2020.
Export earnings fell 4.3% in September to $40.8bn, a still-elevated level by any historical measure but well down from the peaks of 2022 when the tailwinds from the global recovery out of the pandemic drove up commodity prices. That cycle has retraced over the past year - the non-rural component of the RBA's index of commodity prices was down 14.5% (AUD terms) for the year to September - resulting in exports falling 10.2%. The chart below shows the main driver of that decline has been non-rural goods, a category dominated by the major resources.
Quarterly exports moderated by 1.2% to $126.4bn, a near 3-year low. Key movements across the quarter were non-rural goods falling 1.9% on declines in other mineral fuels (mainly LNG) (-11.9%) and iron ore (-0.9%). This was partly offset by a 5.1% quarterly increase in rural goods as the value of meat (5%) and rural products exports (8.7%) lifted.
Following declines of 1.1% in July and 0.2% in August, import spending contracted a further 3.1% in September to $36.2bn, down 7.8% on record highs from 12 months ago ($39.3bn). Driving the decline over the past year has been intermediate goods (-6.7%) - due to fuel imports falling (-12.8%) on lower prices - and capital (-16.9%) and consumption goods (-2.1%) weakening on softer domestic demand conditions.
In quarterly terms, import spending eased 1.1% to $111bn, a level only marginally below the peak from the first quarter of the year ($113.4bn). The decline in the most recent quarter was driven by intermediate goods (-2.6%) - again due to falling fuel imports (-9.5%) on lower prices - and consumption goods (-1.4%), with weakness in vehicle imports (-9.2%) and household electrical appliances (-8.1%) the driving factors.
