Australia’s international trade report for September was released today, and it was good ‘un.
The trade surplus swelled to $1.745 billion from $873 million, breezing past expectations for a smaller increase to $1.2 billion.
Exports jumped by 2.9% to $32.961 billion, thanks largely to a nice bounce in the value of iron ore exports. Imports, on the other hand, only rose by 0.2% to $31.216 billion over the same period.
However, not only did the trade surplus beat in dollar terms, importantly, combined with the data from July and August, it now looks like external trade, or net exports, will contribute handily to Australia’s Q3 GDP report that will be released in one months time.
Of the economist notes that we’ve received so far, all are predicting that it will add to GDP.
“With the full quarter of data published, we expect net exports to add 0.3 percentage points (ppts) to third quarter real GDP growth,” said Jack Chambers and David Plank, economists at ANZ.
Paul Dales, chief Australia and New Zealand economist at Capital Economics, agrees that it will add around a third of a percentage point to headline GDP.
“In the third quarter as a whole, falling prices meant that both export and import values hardly rose at all,” he says.
“But in volume terms, exports may have risen by around 4% and imports may have been up by around 3%. That suggests net exports in the third quarter broadly matched the 0.3 percentage point contribution to real GDP growth in the second quarter.
David de Garis, economist at the NAB, is even more bullish on what today’s report means, suggesting it could add 0.5% to quarterly GDP.
Others, like Kristina Clifton of the Commonwealth Bank, think external trade will add a smaller amount, predicting an increase of 0.1ppts.
So a big piece of the GDP jigsaw puzzle looks like it will add a bit to growth, much like it did last quarter helping the economy bounce back from weather disruptions in the first quarter of the year.
However, unlike the June quarter, retail sales volumes appear unlikely to boost growth on this occasion following two months of declines in July and August.
We won’t know the full picture until Friday when Australia’s September retail sales report, but even with a rebound in nominal sales, the median economist forecast for quarterly retail sales volumes is for a flat result.
If correct, that means that retail — accounting for around a third of household consumption expenditure which is the largest part of the Australian economy — will contribute nothing to real GDP.
Some economists even think it will detract from growth, leaving hopes for a reasonable GDP figure pinned to a strong lift in services volumes, the remaining component in household expenditure.
The retail sales report will arrive on Friday, November 3 at 11.30am AEDT.
After a strong trade result today, it could well paint a very different picture on the health of the household sector.