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November, 2018 9:31 AM



Record trade with China

Record trade with China

The trade surplus eased from $1,937 million in June (previously $1,873 million) to $1,551 million in July. It was the 12th surplus in 15 months.

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06.09.2018 04:14 PM

Record trade with China
International trade

Trade surplus: The trade surplus eased from $1,937 million in June (previously $1,873 million) to $1,551 million in July. It was the 12th surplus in 15 months.

Trade with China: Australia's annual imports from China rose from US$67.77 billion to U $68.75 billion – a record high. Australia's annual exports to China rose from US$105.44 billion in June to US$106.58 billion in July – a new record high. The trade data has the potential to affect the Aussie dollar so it may be important for exporters and importers.

What does it all mean?

Australia continues to pay its way in the world. While the east coast drought may affect trade and regional economic activity over the next six months, at present the annual total of rural exports is only easing modestly from record highs.

Australia continues to set new records with its Chinese trade. Both exports to China and imports from China hit record highs in the year to July. Of course the data highlights Australia’s dependency on China. It is very much in Australia’s interests that the Chinese economy remains strong.

What do the figures show?
International trade

The trade surplus eased from $1,937 million in June (previously $1,873 million) to $1,551 million in July. It was the 12th surplus in 15 months. The rolling annual surplus rose from $6.219 billion to $7.408 billion.

Exports of goods and services fell by 1.0 per cent (goods fell by 1.4 per cent).

Imports of goods and services rose by 0.1 per cent (goods fell by 0.3 per cent).

Exports were up by 13.7 per cent on a year ago, while imports were up 9.8 per cent.

Rural exports fell by 1.8 per cent – the second decline in six months. Non-rural goods fell by 0.6 per cent. Gold exports fell by 9.6 per cent after rising by 5.6 per cent in June.

Exports were driven lower by a $77 million fall in cereals; $30m fall in wool, $367m fall in metal ores, $275m fall in “other non-rural” exports and $189m fall in gold.

Within imports, consumer imports fell by 3.7 per cent; capital goods imports fell by 6.5 per cent and intermediate goods imports rose by 5.6 per cent.

Consumption goods imports were up by 2.5 per cent on a year ago while capital goods imports were down by 0.7 per cent and intermediate goods imports were up by 25.2 per cent.

The net services deficit widened from a 12-month low of $252 million to $327 million.

Australia's annual exports to China rose from US$105.44 billion in June to US$106.58 billion in July – a new record high. Exports to China are up 10.7 per cent on a year ago. Exports to China account for 33.5 per cent of Australia's total exports, just off record highs.

Australia's annual imports from China rose from US$67.77 billion to US$68.75 billion – a record high. Annual imports were up by 11.6 per cent on a year ago. Imports from China accounted for 23.21 per cent of Australia's total imports, down from a record 23.45 per cent in April 2017.

Australia's rolling annual trade surplus with China rose from $37.66 billion to an 8-month high of $37.83 billion.

Australia's rolling annual trade deficit with the US rose from $18.07 billion to $18.29 billion. Imports from the US account for 10.11 per cent of total imports, just up from the record low of 9.88 per cent in June.

What is the importance of the economic data?

The monthly International Trade in Goods and Services release from the Bureau of Statistics provides estimates on exports and imports of physical goods (such as coal, beef and computers) and services (such as travel receipts). The balance of goods and services (BOGS) is a narrower description of Australia’s external position than the current account estimates. The import data is a useful gauge of consumer and business spending while exports reflect global demand as well as domestic influences such as drought.

What are the implications for interest rates and investors?

The trade data has few immediate implications for interest rate settings. But the Reserve Bank will keep a close eye on economic activity in China. CommSec expects rate settings to remain unchanged until 2019.

The solid position of our trade accounts would be viewed positively by foreign investors and thus provide support to the Aussie dollar. But interest rate differentials and export prices currently are the main influences on the value of our currency.

Published by Craig James, Chief Economist, CommSec
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