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Tuesday, 5 April 2016

ABS finds $2.5bn services imports

Deficits revised out 


Today's ABS International Trade release noted that the statisticians have found another $2.45 billion of imports for the past seven months, which is, like, a whole extra month's worth of deficit.

After revisions, a seasonally adjusted trade deficit of $3.4 billion was recorded in February - the 23rd consecutive deficit - while January was revised out to a deficit of $3.1 billion.

Australia's annualised trade deficit for the year to February is now a record one in dollar value terms.

Exports hit

Imports have declined by 2 per cent over the year, though a 10 per cent year-on-year increase in the import of consumption goods may reflect some positive news about consumer activity and sentiment. 

Exports are down quite sharply year-on-year, by 8.5 per cent. 

The expected bounce was recorded in iron ore export values in February, but gold exports fell by a fifth and the figures for coal were simply awful, the worst single month for export FOB values in nearly six years. 

Meanwhile, increased LNG volumes have been offset by a hit to prices. 

The only real plus point of note here is the ongoing uptrend in services exports. 

The rolling annual FOB values every one of our major merchandise exports has been shaping down lately, from the bulk commodities and LNG, to gold, copper, aluminium, and even meat and live exports. 

Not a great look, and a chart which suggests that a lower dollar will be considered important for the desired rebalancing of the economy.

Lower ore prices bite

In rolling annual terms, the dollar value of merchandise exports to China has declined by more than a fifth since the 2014 peak, while exports to Japan have also faded. 

More than 5.5 per cent of exports are now bound for the US, the highest share of exports in seven years, with $13.6 billion of merchandise exports headed Stateside over the year to February. 

Thanks to the ramping up of LNG projects the dollar value of exports from Queensland has held their ground. 

However, exports from WA and therefore royalty revenues have been absolutely "Swiss cheesed" by the crash in the iron ore price. 

Similar trends are reflected in the respective trade balance of the states. While Queensland has moved in to an annual surplus of more than $13 billion, WA has seen its rolling annual trade balance dropped by more than a third since 2014. 

The wrap

Although there wasn't much reaction from currency markets - as seems to the way of things these days - overall this was a poor result after accounting for all of the revisions, and without a lower dollar it's hard to see how the trade position moves away from recording substantial deficits.

We'll see what (if anything) the Reserve Bank has to say about that in its Monetary Policy Decision in about three minutes time.