Trade crisis what trade crisis as Australian reported its best surplus for nearly two years, making a mockery of all those ‘experts’ who had forecast doom and gloom from Donald Trump’s tariff war with China, Japan, and Europe.
While the trade war and the threat remains real, Australia’s trade performance has in fact improved, not worsened in 2018, even as the Chinese economy has slowed (as China’s September quarter data last month confirmed, with the exception of iron ore, coal and LNG prices).
And it was those commodities, plus the weaker Aussie dollar that helped boost the September trade surplus to a seasonally adjusted $3.02 billion when economists had forecast $1.7 billion.
August’s seasonally adjusted surplus was revised up to $2.342 billion from the first reported $1.604 billion, while July’s surplus is now $1.907 billion against the first reported $1.425 billion. That is an extra $1.23 billion in export income in those two months on top of the higher than expected figure for September.
August exports rose 1% to $37.496 billion, while imports fell 1% to $34.479 billion. ABS data shows that since September 2017, exports are up $5 billion or 19% while imports are up a smaller 9.2%.
Good commodity prices helped metal ores and minerals contribute an extra $551 million, or 7%, for the month, while fuel exports rose by 6%, or $270 million.
But total coal exports dropped 3% or $141 million, while LNG exports were down 2% or $85 million.
Sheepskin and wool exports rose 12% to $428 million, helping to push rural exports up $33 million to $4.211 billion
There was also a $525 million, or 26%, trend decline in exports of non-monetary gold which is a volatile commodity.
Among services, travel exports added an extra $96 million for September, up 1% to $5.376 billion.
The slide in the value of the Australian dollar since then from around 80 US cents to just under 71 US cents, has boosted export income, and crimped import costs as importers switched to locally sourced products. Rising fuel costs from higher oil prices and the lower Aussie dollar took their toll, boosting imports.
The news saw the Aussie dollar jumped back over 71 US cents on the first day of the new month after it had lost half a cent over October. It was only last week that the currency fell to a three year low on fears about Chinese economic growth and more tariffs from Donald Trump.
Separate figures from the Australian Bureau of Statistics on our export and import indices showed export prices for the September quarter jumped 3.7% while import values climbed 1.9%, pointing to an improvement in our terms of trade of around 1.8% on a preliminary basis.
“Net export volumes likely contributed around 0.2 percentage points to growth” in the third quarter, said David de Garis, a senior economist with the National Australia Bank.
Gross domestic product data for the third quarter is in a month’s time in early December.
“It’s more income into the economy, buttressing near-term growth and giving the central bank more confidence on the flow through of the resources expansion through to the economy,” Mr de Garis added.
Ryan Felsman, senior economist, Commsec, said that despite concerns over the slowing Chinese economy, demand for Australian natural resources remained “buoyant”.
“The good news from an Aussie perspective is that we are continuing to weather the storm. In fact, Australia’s external trade balance is improving, having recorded the largest surplus in 19 months and a positive trade balance in every single month this year. Australia continues to set records with its top trading partner, China. Both annual exports and imports climbed to new apexes in September.
A private survey of the Chinese manufacturing sector released on Thursday showed marginal growth in October. The Caixin-Markit purchasing managers’ index rose to 50.1 in October from 50 in September. The 50-point level separates expansion from contraction. Official surveys released earlier this week showed manufacturing and service activity slowed but were still expanding in October.
