Australia’s December trade report has come in well below market expectations, continuing the pattern seen in recent months.
According to the Australian Bureau of Statistics (ABS), a deficit of $1.358 billion was recorded in seasonally adjusted terms, far below the $200 million surplus expected by economists.
November’s trade deficit, initially reported at $628 million, was revised to show a small surplus of $36 million, partially offsetting the ugly December result.
Exports rose by 1.6% to $32.465 billion over the month, outpaced by a mammoth 6% increase in imports, which rose to $33.823 billion in seasonally adjusted terms.
The import figure was the largest on record.
This table shows the breakdown of the December report after seasonal adjustments were applied, comparing movements to prior months.
“The [trade balance] deterioration had nothing to do with export values which rose by 1.6%. Instead, it was largely due to a 6.0% leap in import values,” said Paul Dales, Chief Australia and New Zealand Economist at Capital Economics.
“Some of that was due to the rising cost of imported oil, but most of it was due to a continuation of the recent trends of strong imports of consumption goods and capital goods.
“That is obviously a sign of healthy domestic demand.”
Across the board, import growth was strong, pointing to strengthening demand from Australia’s household and business sectors.
Imports of intermediate and other merchandise goods rose $901 million, the fastest growth of any category in dollar terms. Imports of consumption and capital goods also increased by $422 million and $341 million respectively, while those for non-monetary gold rose by $204 million.
Services imports also increased by $36 million.
On the other side of the ledger, exports of non-rural goods jumped by $719 million, offsetting declines in all other categories.
Australia’s major commodity exports did all of the heavy lifting.
Exports of metal ores and minerals, largely iron ore, jumped by $336 million while those for coal, coke and briquettes and other mineral fuels (LNG) rose by $306 million and $245 million respectively.
Those gains helped to mask weakness in all other categories with exports of rural goods, non-monetary gold and services falling by $144 million, $9 million and $54 million respectively.
Despite revisions to prior data — seeing deficits turn to surpluses — Dales says the December deficit points to the likelihood that net exports will detract from Australian Q4 GDP when it is released early next month.
“[It] suggests that net exports may have subtracted as much as 1.0 percentage points from GDP growth after having had a neutral influence in Q3,” he says.