Australia: Positive start of trade account in 2018 led by higher exports - Westpac

Andrew Hanlan, Research Analyst at Westpac, explains that in the space of a month, Australia's trade position has turned around from a deficit of $1.1bn to a surplus of $1.1bn.

Key Quotes

“The January outcome exceeded expectations, with the market looking for a surplus of $160mn and Westpac at $600mn.”

“Recall that the trade balance deteriorated from a surplus of $252mn in November to what proved to be a one-off deficit in December.”

“Imports spiked in December, increasing by $2.0bn, a jump of 6.2%. With broad based strength this suggested an abnormal clustering of import arrivals.”

“Imports did pull-back in January, albeit only a partial unwind, down $0.8bn, a decline of 2.4%.”

“Exports have begun the March quarter and the 2018 year on a positive note, increasing by 4.3%, a rise of $1.4bn.”

“In January, export strength was centred on gold, manufactured goods and fuels (which includes LNG). Together, these rose by 19%, +$1.4bn, fully explaining the lift in total exports.”

“This is a welcomed turnaround in Australia's trade position.”

“Notably, in the December quarter, a temporary dip in export volumes, of 1.8%, subtracted a sizeable 0.4ppts from activity.”

“Australia’s export performance is expected to improve in 2018 at a time of robust world growth and additional capacity in the LNG sector. The January outcome lends support to this view.”