Trade surplus blows past economist forecasts, reaching $1.87 billion

Australia’s trade surplus hit an eleven-month high in June, reaching $1.87 billion and blowing past economist forecasts.

Economists had been expecting a trade surplus of $900 million for the month, according to Bloomberg estimates, a slight increase on May’s $827 million surplus which was revised in June to $725 million.

Exports were $36.4 billion on a seasonally-adjusted basis, up from $35.5 billion in May. Imports reached $34.6 billion, down from $34.8 billion recorded in the previous month.

The increase in exports was mostly due to a rise in resources exports, noted Paul Dales at Capital Economics, as metals, coal and LNG exports gained a little bit of ground.

There was a 10 per cent month-on-month leap in cereal exports, he also noted, while adding that the higher contribution may have come from a price hike due to recent drought conditions rather than higher volumes.

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The drop in imports also boosted the overall surplus, he said, with an 11 per cent month-on-month drop in fuel imports following a fall in oil prices a notable contributor to the lower import number. 

The trade numbers for June are the latest in a succession of surpluses. The Australian dollar nudged up to US74.08¢ after the data.

The data feeds into economist forecasts for gross domestic product and Westpac’s Andrew Hanlan said that net exports are now likely to be slightly positive in the second quarter of 2018, adding around 0.1 percentage points to activity. 

That would be a lower figure than the 0.35 percentage point boost to the economy from exports in the first quarter, he noted, which was in turn inflated by a rebound in export volumes after a weak end to 2017. 

“We will know more after June’s retail sales are released tomorrow, but we currently estimate that the 1.0 per cent quarter-on-quarter rise in GDP in the first quarter was followed by a 0.5 per cent quarter-on-quarter rise in the second,” said Mr Dales at Capital Economics.

“More importantly, if global trade barriers continue to rise, then the external sector will find it harder to support the economy.”

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