Australia: Trade account slides into deficit as imports spike - Westpac

Andrew Hanlan, Research Analyst at Westpac, notes that Australia's international trade position ended 2017 on a weak note, sliding into deficit as imports spiked.

Key Quotes

“A deficit of $1.4bn was recorded for the month, a $1.4bn deterioration on November.”

“Adding to the surprise, the October and November outcomes were upgraded by a combined $1.2bn. October was revised to +$193mn from -$302mn and November to +$36mn from -$628mn.”

“Imports spiked 6.0%, +$1.9bn, in December. Strength was broadly based, suggesting some clustering of import arrivals around the turn of the year - pointing to a reversal in January.”

“Exports increased by 1.6%, $0.5bn, falling short of expectations. Gains in iron ore, coal and LNG, reflecting a combination of higher prices and increased shipments, were partially offset by declines for rural goods, metals and services.”

“For the December quarter, the ABS advise that the trade position deteriorated from a $2.0bn surplus in Q3 to a deficit of $0.6bn in Q4.”

“Import volumes advanced further in the final quarter of 2017 to meet rising domestic demand, while the uptrend in export volumes was temporarily punctured by a dip in Q4.”

“Real net exports subtracted around 0.5ppts from Q4 GDP, our preliminary calculations suggest. That is a larger impact than the drag of 0.3ppts we had been anticipating.”

“More broadly, we expect Australian economic growth in the December quarter to be underpinned by rising domestic demand, across consumer spending, business investment and public demand. Labour force data reported that hours worked increased by a robust 1.1% in the quarter and by 3.5% above the past year.”