Australia's Trade Deficit Narrows In August

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Tuesday, the Australian Bureau of Statistics announced that Australia's trade deficit narrowed less than expected in August, compared to the month-ago period. The narrowing of the deficit was largely because of a fall in goods imports. This marks the fifth consecutive month in which Australia has posted a trade deficit.

Australia's trade deficit was at a seasonally adjusted A$1.52 billion in August compared to a revised A$1.78 billion deficit in the previous month. Economists were looking for a deficit of about A$900 million.

Exports of goods & services fell 2% on month to A$19.33 billion in August, the report showed. Of this, exports of non-rural goods fell 3%, while services exports rose 1%. Exports of rural goods dropped 3% and non-monetary gold exports fell 1%.

In terms of components, exports of coal, coke & briquettes witnessed the largest slide, down 8%. Other components that recorded decreases included other rural goods, which fell 7%, and other non-rural goods, down 6%. The fall in exports was partly offset by exports of metals, which rose 10%, and exports of transport equipment, up 19%.

On the other hand, imports of goods & services were down 3% to A$20.85 billion in August. Of this, imports of intermediate & other merchandise goods decreased 10% and consumption goods imports fell 6%. The fall in imports was slightly offset by imports of non-monetary gold, which increased 118%, capital goods imports, which rose 2%, and services imports, up 1%.

By components, imports of fuels & lubricants recorded the most significant decrease in August, down 24%. This was mainly driven by a fall in crude petroleum imports, which plunged 26%. Other components that witnessed decreases include imports of consumption goods n.e.s., down 9%, while imports of processed industrial supplies n.e.s. were down 6%. Non-industrial transport equipment imports were down 8%, and imports of industrial transport equipment n.e.s. were down 14%.

Meanwhile, the Commonwealth Bank of Australia and the Australia Industry Group announced yesterday that the performance of services index, which is a measure of service industry activity, climbed 1.3 points on month to a seasonally adjusted score of 49.3 in September. Although the index showed an improvement from last month, a reading below 50 means that the sector is still contracting.

"While it is clear that a level of confidence is returning to the sector, we shouldn't get ahead of ourselves," Australian Industry Group Chief Executive Heather Ridout said. "The improvement is patchy and largely focused around sectors positively affected by the government's stimulus measures and low interest rates."

Rising demand for retail and wholesale trade goods boosted stronger department store sales and contributed to solid activity growth in both sectors. Employment remained broadly steady in September, supported by jobs growth in personal & recreational services, finance & insurance, and property & business services.

"The latest Australian PSI outcome showing a continuing improvement in underlying services sector conditions is gratifying and is consistent with other recent economic data confirming that the local economy dodged the recession bullet and is now in the early phase of a modest recovery in economic activity," said Commonwealth Bank Senior Economist John Peters.

The Australian dollar edged down against most of its major rivals following the release of the trade data.

Tuesday, the Australian Bureau of Statistics announced that Australia's trade deficit narrowed less than expected in August, compared to the month-ago period. The narrowing of the deficit was largely because of a fall in goods imports. This marks the fifth consecutive month in which Australia has posted a trade deficit. (Market News Provided by RTTNews)