As expected the falls in contract prices for coking, thermal coals and iron ore, plus impact of the rising value of the Australian dollar have ended Australia’s recent run of monthly trade surpluses.
The Australian Bureau of Statistics said yesterday that its preliminary estimate for April was a deficit of $91 million, a turnaround of $2.393 billion on the revised March surplus.
The value of exports fell 11% from March, and was only partly offset by a 2% drop in the value of imports.
As well there were significant revisions downwards in the size of the trade surplus for March and February.
The result was much worse than the market had expected: many economists had been forecasting a surplus of varying size, but were apparently caught short by the size of the adjustment caused by the lower prices for coal and iron ore which started April 1.
Just as exports and imports helped push growth higher in the March quarter, aided by government spending and solid consumption, the first trade figures for the new quarter show a very sharp fall in the size of the surplus.
In fact the small deficit might not have occurred if there hadn’t been a $195 million reduction in the original estimate for the March surplus of $2.498 billion to the $2.302 million reported this morning. (Source ABS)
There was also a $526 million cut to the value of the February surplus at $1.683 billion from the $2.109 billion originally reported.
(That’s more than $700 million in cuts to the size of the surplus in the very buoyant March quarter.)
It’s not clear if this information was known in time for the National Accounts, released yesterday, or the balance of Payments figures released on Tuesday for the March quarter.
And there’s a strong chance of further cuts, especially to April’s deficit estimate.
That would see the $2.3 billion turnaround end up being larger as the ABS adjusts its figures to take account of more accurate figures for the falls in coal and iron ore prices from the April 1 year.
From the information in yesterday’s report, there are some more price reductions to factor in, especially with the Chinese steel mills still talking to BHP Billiton and Rio Tinto about pricing.
The value of coal, iron ore, transport equipment (cars), metals and other manufactured goods fell, as did the value of rural exports.
It was an export picture more in keeping with a modest global slump, rather than a growing world economy which the figures up to March seem to suggest to some people.
Not helping was a big 37% fall (or $783 million) in the value of non-monetary gold exports (which were only partly offset by a smaller 32% (or $305 million) fall in the value of non-monetary gold imports).
Gold imports and exports have become particularly volatile in recent months, no doubt linked to demand and world prices.
It is the first deficit since last July: there had been eight months of surpluses in a row.
The estimated $91 million shortfall though is still very low by recent levels.
These are not gloomy figures, just more realistic in view of the cuts to coking coal and iron ore prices.
But for those who will say the April figures tell us gloom and more gloom to come, there are a couple of snippets that suggest something different.
Coal exports are being delayed from the port of Newcastle because more ships are turning up to take coking and steaming coal to Asia.
Figures from the port show that shipments rose 20% in the latest week, while the number of ships waiting outside the port increased.
Newcastle is the biggest export coal export in the world, so it’s a solid barometer for demand for the fuel.
In the week to June 1, 1.9 million tonnes was shipped, up from 1.59 million tonnes the previous week.
A total of 40 vessels waiting to load 3 million tons of coal, were lined up outside the port, up from 35 ships last week.
The port said 22 left Newcastle in the week ended May 30: 12 for Japan, six for China, and one each for the Netherlands, Korea, Mexico and Taiwan.
The weekly price index for power-station coal shipped from Newcastle last week rose 3.5% to $67.09 a ton, the highest since the week ended February 20.
Another snippet: Northwest shelf exports of LNG are running to capacity, not because Japan, the biggest customer is booming, but because demand is strong from China in particular. Japanese trade figures show that LNG imports fell 7.9% in April, the most recent figures.
LNG is primarily a domestic fuel in Japan: it’s used to generate electricity or reticulated in major cities and towns because of its cleanness. The fact that demand and imports fell tells us that less electricity is being used by business and households.
This is not conclusive information, just more small indicators you should be aware of as you judge the wider picture.
And, buried away in a not to solid looking survey of activity in the Australian services sector this week was a small spark of news about employment.
The Australian Industry Group-Commonwealth Bank Performance of Services Index PSI remained stable in May at 39.9, up just 0.1 points from April, seasonally adjusted, in the month.
It was the 14th straight month the index has come in below the key 50 level
