Australia: Trade deficit narrowed in January

Australia: Trade deficit narrowed in January

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Australian imports exceeded exports again in January, marking the ninth consecutive month in which the trade balance printed in the red. The deficit did narrow, however, to A$1.2 billion from a downwardly revised A$2.2 billion in December. A reduction in imports was the main driver behind the improvement in the trade balance, though the rise in exports pushed the deficit down slightly more than the market had expected (J.P. Morgan –A$1.5 billion, consensus –A$1.6 billion).

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Imports fell 3%m/m in January, which squares with preliminary data suggesting a 4%m/m decline in import values over the month. The consumption goods category rose modestly (up 2%), owing to a large contribution from imports of textiles, clothing and footwear (up 30%). The spike in imports of consumption goods is unsurprising, given this week’s very strong retail sales number for January (up 1.2%m/m), which in particular showed a surge in the discretionary spending (up 0.7%m/m). Capital goods imports declined 1% over the month however, with the main contributor being the drop in the machinery and industrial equipment category, which slid 6%m/m, after plummeting 10%m/m in December.

Exports increased by 1%m/m over the month, with the majority of the strength stemming from non-rural goods (also up 1%). The metal ores and minerals component rose a remarkable 7%, while exports of coal, coke and briquettes fell 3% from the very elevated levels witnessed at the end of 2009. The mixed composition of commodity exports in the January report is consistent with shipping data from selected ports, which showed an improvement in iron ore exports in January, and a decline in trend coal exports from December through February. The traditional bastion of Australia’s exports, rural goods, fell 2%m/m, however, dragged down by the ‘other rural’ category.

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ENDS

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