- Australia recorded its largest trade surplus since May 2017 in June.
- Exports surged by 3% to a record high. In contrast, imports fell 1%.
- Despite the large surplus, economists don’t think trade will add much, if at all, to economic growth in the June quarter.
Australia recorded another mammoth trade surplus in June, driven by a surprise surge in the value of exports.
According to the Australian Bureau of Statistics (ABS), a trade surplus of $1.873 billion was recorded in seasonally adjusted terms, more than doubling the $900 million figure that had been expected by economists.
It was the largest trade surplus since May 2017, and substantially higher than the downwardly-revised $725 million surplus of May.
Helping to explain the surprising result, the ABS said the value of exports surged by 3% to $36.439 billion in seasonally adjusted terms, leaving it at the highest level on record.
The value of non-rural goods exports — the largest category in dollar terms — jumped by $542 million over the month, helped by strength in iron ore, coal and LNG exports.
Exports of rural and non-monetary gold also increased by $181 million and $104 million respectively, while services exports also chimed in with a gain of $87 million from May.
The increase in services was identical to the contribution made from tourism exports which also rose by $87 million over the month.
In contrast to the surge in exports, the value of imports actually fell, dipping 1% to $34.567 billion after seasonal adjustments.
The largest drag came from imports of intermediate and other merchandise goods which fell by $400 million during the month.
Much of that decline reflected softer fuel imports which slumped by $366 million compared to May.
Imports of non-monetary gold and consumption goods, as well as services, also softened, falling by $112 million, $14 million and $22 million respectively.
The largest drag on consumption goods — an indicator on consumer demand — came from weakness in imports of textiles, clothing and footwear which fell by $68 million.
Capital goods imports managed to buck the broader trend, lifting by $313 million from May.
Despite the widening in the trade surplus in June, and a series of trade surpluses recorded in prior months, Paul Dales, Chief Australia and New Zealand Economist at Capital Economics, says it’s unlikely to add to economic growth when Australia’s Q2 GDP report is released early next month.
“In the second quarter as a whole, nominal exports and imports both rose by close to 2.5%,” he said.
“But after taking into account the gains in prices, we estimate that both real imports and exports fell by close to 1.0%… [meaning] net exports may have been broadly stable.”
Andrew Hanlan, Senior Economist at Westpac, offered a similar assessment, suggesting next exports will likely add around 0.1 percentage points to GDP growth.
“[This] contribution falls short of the 0.35 percentage points boost to activity in Q1 that was inflated by a rebound in export volumes following a weak end to 2017,” he said.
Following the trade report, Australia will receive its first major Q2 GDP input on Friday when the ABS releases its June retail sales report.
Quarterly retail sales volumes are expected to increase by 0.8%, an outcome that will add modestly to real GDP.
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