Australia’s trade surplus narrowed sharply in April, falling to the lowest level since October last year on a back of a sharp drop in exports.
According to the ABS, the surplus fell to $555 million in seasonally adjusted terms, nearly four times smaller than the $1.9 billion surplus that had been expected by the markets.
March’s trade surplus, originally reported at $3.107 billion, was revised higher to $3.169 billion.
Over the month, exports plunged by 8% to $30.59 billion, thanks largely to an enormous decline in the value of non-rural goods exports.
They fell by $2.497 billion to $18.594 billion, driven by a slump in the value of coal exports as a result of supply disruptions caused by Cyclone Debbie along Australia’s east coast in April.
The ABS said that exports of coal, coke and briquettes fell by $2.521 billion to $3.087 billion during the month.
In volume terms, and reflecting the supply disruptions caused by Cyclone Debbie, the ABS said that export volumes of hard cooking plummeted by 65%. Volumes of thermal coal — less exposed to the impact of Debbie — fell by a smaller 5%.
Export of metal ores and minerals — almost entirely iron ore — were largely unchanged, falling by $72 million to $18.594 billion. That reflected weaker prices, partially offset by increased volumes.
Exports of other mineral fuels, predominantly LNG, fell by $126 million to 2.361 billion.
Aside from Australia’s main commodity exports, non-monetary gold exports declined by $373 million while the value of rural goods exports fell by $73 million to $4.057 billion.
Those declines were partially offset by a lift in services exports, rising by $156 million to $6.423 billion.
This table from the ABS breaks down April’s trade report in seasonally adjusted terms.
On the other side of the trade ledger, the ABS said that imports also declined, falling 1% to $30.035 billion.
The largest decline came from imports of intermediate and other merchandise goods, sliding by $198 million to $9.081 billion.
Imports of non-monetary gold and consumption goods also weakened, offsetting solid increases in imports of capital goods and services.
While the weakness in consumer goods imports may reflect weak retail spending in the early parts of the year, the decline in April followed a large increase previously reported in March.
The lift in capital goods exports is also an encouraging sign on the outlook for business investment, and fits with the strength in non-mining business investment and profitability seen in the Australia’s GDP report released earlier this week.
So despite the sharp narrowing in the surplus in April, it’s not all bad news, particularly with one-off factors largely driving the result.
With coal exports now recovering, it’s likely that the surplus will likely rebound modestly in the short-term, although its unlikely to reach the levels seen earlier this year given renewed weakness in iron ore and coal prices.
“While real export output will rebound over time, the nominal trade data will be slugged by the rapid normalisation in commodity prices,” said Tom Kennedy, economist at JP Morgan.
Kennedy also says that the collapse in coal export volumes will “have a non-trivial negative impact on net trade in Q2”, a similar outcome to that seen in the first three months of the year.