Imports soar to record highs

Imports of goods

• Imports lift: Imports of goods rose by 0.2 per cent in seasonally adjusted terms in July to record highs.
• Record imports from China, India: Annual imports from India hit $4 billion for the first time. And imports from China hit a record 22.4 per cent of all imports.

What does it all mean?

• Imports are a key measure of economy-wide spending. The only complication is that the data can reflect both changes in shipments and changes in prices. But the trends are important. Not only did imports hit record highs in July, but the result was up over 10 per cent on a year ago. In part the strong result reflects currency effects given the weaker Aussie dollar over the past year. But based on other data and surveys, the result would also reflect higher shipments. The latest data suggests that import prices are only up 1.3 per cent over the year.
• While the spotlight has been on China, India is becoming a more important trading partner day by day. For the first time, annual imports from India have hit $4 billion. And while there is a long way to go, imports from India stand at a record high of 1.6 per cent of Australian imports. In just over four years, imports from India have doubled.
• China hasn’t been pushed too far from the spotlight with imports from China also hitting record highs over the past year. Around $1 in every $4.50 of goods that come from into Australia come from China. No country has been as dominant over the past 30 years.

What do the figures show?

• Imports of goods rose by 0.2 per cent in in seasonally adjusted terms in July to record highs. Imports stand 10.1 per cent higher than a year ago. Over the past three month imports were up by 6.8 per cent on a year ago – the fastest rate in 13 months.
• In original terms, imports were up by 6 per cent in July. Capital goods rose $662 million (13 per cent), driven by civil aircraft and confidentialised items, up $394 million (72 per cent) and machinery and industrial equipment, up $157 million (9 per cent).
• Consumption goods rose $228 million (3 per cent), driven by toys, books and leisure goods, up $64 million (13 per cent) and textiles, clothing and footwear, up $59 million (4 per cent).
• Intermediate and other merchandise goods fell $811 million (8 per cent), driven by fuels and lubricants, down $693 million (23 per cent).
• Imports from India hit a record high of $486 million in July, up 92.1 per cent on a year ago. And imports from India over the year to July hit $4,033 million, up 40.7 per cent on a year ago.
• Imports from China hit a record high of $57,844 million in the year to July, up 15.1 per cent over the year. China accounts for a record 22.37 per cent of Australia’s imports.
• Imports from the US hit a 31-month high of $27,785 million in the year to July, up 7.3 per cent over the year.

What is the importance of the economic data?

• The Australian Bureau of Statistics (ABS) provides monthly estimates of International Merchandise Imports on a monthly basis. Given the high share of imports in overall spending, the trends are important in measuring economy-wide spending. The results can be complicated by currency effects though.
  What are the implications for interest rates and investors?
• The data on imports will be important to track over time. The lift in imports may reflect actual demand for goods but may also reflect price trends given the weaker currency. Both have relevance for interest rates. If import prices are rising, the Reserve Bank will need to watch the speed and extent of the pass through to goods actually sold.
• The latest data reinforces our view of interest rate stability in coming months.