Another monthly trade deficit with those lazy, hazy days of summer and the big trade surpluses banished by the downturn in iron ore and coal prices, while the slump in imports shows the slowdown is still curbing demand, especially for capital goods.
In fact the impact of the global slump on resource projects and other business investment was again seen in the noticeable fall in the value of capital goods in the month, off 14% or more than half a billion dollars in May.
The import figures though tell us that the economy has gone to sleep, enlivened only by the housing sector and the stimulus boost to some sections of retailing (imports of household electricals rose 6% or $29 million in the month, according to the ABS).
The imports fit with the very subdued business credit figures from the Reserve Bank earlier in the week which also showed a fall in May.
In fact, the early information flow from May is a bit like April, except housing approvals were down a touch and retail sales a bit stronger. Private credit was weaker, next week we will find that employment rose and overall it’s a bit more of the same.
But no bitter slump like Japan, the US and Europe continue to endure, even if there’re signs of an easing in the intensity of the recession.
Export income fell in May faster than imports fell, with the result a deficit of $560 million was recorded, significantly higher than the restated $282 million deficit for April.
That was originally reported as a deficit of $91 million, and the revisions continue the recent trend of reworking of the monthly trade figures as prices for iron ore, coal and other mineral exports are reinterpreted to get more accurate outcomes.
The Australian Bureau of Statistics said that seasonally adjusted export income fell $1.112 billion (or 5%) to $20.392 billion in may with non-rural goods falling $684 million (5%), other goods $368m (24%) and rural goods down 3% or $86m. Services credits rose $27m (1%).
The ABS said that imports fell 4%, seasonally adjusted terms, ($838 million) to $20.948 billion.
"Capital goods fell $577m (14%), intermediate and other merchandise goods fell $464m (7%), consumption goods fell $54m (1%) and services debits fell $37m (1%). Other goods rose $294m (35%)," the ABS said.
The trade performance will continue to readjust for the next few months as more accurate information becomes available on the impact of the big price cuts for coking and thermal coal and iron ore.
However iron ore price talks remain deadlocked with the big Chinese buyers, and there’s a growing chance that more and tonnage may be sold into the spot market by Rio Tinto and BHP Billiton, which will further add to the monthly variations for export income.
The ABS also detailed a number of revisions to the trade figures going back into 2008.
It’s too early to say if these will have any significant influence on economic growth in the three quarters to the end of March.
The ABS has to work out where the revisions impact in the trade account, but they do have the potential to cut growth.
"Revisions have been made to incorporate the latest available data relating to merchandise trade and international trade in services. In original terms, these revisions have:
"Turned around the surplus on goods and services for April 2009 by $196m, resulting in a deficit of $39m; decreased the surplus on goods and services for the 10 months ended April 2009 by $2,847m to $6,260m.
"Increased the deficit on goods and services for 2007-08 by $2,055m with: goods debits increasing by $75m! Service credits increasing by $16m services debits increasing by $1,996m, "the ABS said.
Chris Caton, Chief Economist with BT Australia said in his comment yesterday:
"Australia may have returned to trade deficit territory, but it’s hard to get too upset.
"Exports are falling because coal and iron ore prices have undone some of their remarkable rise in 2008.
"The understated story may well be the continuing weakness in imports, which have fallen by 18% in the past six months.
There are no monetary policy implications from today’s data. Rates are on hold for the foreseeable future."
Mr Caton pointed out that "Japan remains our biggest export market, taking 23.0% of our merchandise exports in the eleven months to May, compared with 18.9% a year ago.
"This gives some idea of the effects of (still high) coal and iron ore prices.
"China’s export share was 16.8%, compared with 14.9% last year.
"China is also our largest source of imports, with its share being 16.9%, up from 15.5% a year ago.
"So far this financial year, we have run a trade surplus of $1.72 billion with China.
"The US’s share of imports was 11.6%, down from 12% a year earlier."
