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Exports to China soar to a record $100 billion

Tue, 06 May 2014 21:40:47 +0000

International Trade

Exports to China increase.

Healthy trade surplus: Australia’s trade accounts narrowed from a revised trade surplus of $1,257 million (previously $1,200 million) to a surplus of $731 million in March.
Exports to China soar: Over the past year exports to China hit a record $100.3 billion, up 32.1 per cent over the year and accounting for a record 36.7 per cent of Australia’s total exports.
Australia’s rolling annual trade surplus with China rose from $50.1 billion to a record $51.7 billion in March, translating to over $2,200 for every Australian person.

What does it all mean?

The latest trade data shows that Australia is paying its way in the world notching up its fourth consecutive trade surplus. In fact the cumulative trade surplus over the past four months was over $3.1 billion – the largest surplus in over two years for a similar period. If there is one downside it is the fact that the Aussie dollar has lifted towards US93c and may have find further strength in coming months. Still, while businesses don’t like the strong currency, consumers would applaud the firmer Aussie. In addition the Reserve Bank seems more comfortable with the stronger currency given the domestic economic recovery is more concrete and export growth is still healthy.
Interestingly Australia’s trade exports with China surged to a record $100 billion over the year to March and well over a third of our exports now head to China. Mining investment may have flattened, but the boost to the economy from Chinese purchases of our resources is on-going.
In fact while some fret that the mining boom is over, in the background Australia continues to rack up record trade surpluses with China. The trade surplus with China hit a record high $51.7 billion in the year to March. Interestingly over a quarter of all our trade is now conducted with China. Our reliance on China is now even greater than when Japanese industrialisation was at its peak.
Looking forward, exports may be marginally disadvantaged from a mildly higher Australian dollar. However the fortunes of Australia’s external trade accounts rests squarely on the mining boom, and the rebound in activity across emerging economies certainly bodes well for Australian coffers. Healthy prices and strong growth in iron ore volumes are likely to ensure that trade surpluses are part of the economic landscape. Over the next year the anticipated lift in LNG export volumes should ensure a further improvement in Australia’s trade accounts.

What do the figures show?

International trade:

Australia’s trade accounts narrowed from a revised surplus of $1,257 million in February (previously $1,200 million) to a surplus of $731 million in March.
In March, exports of goods and services fell by 1.8 per cent (goods fell by 2.4 per cent) while imports of goods and services fell by 0.1 per cent (goods up 0.1 per cent). Exports are up 12.9 per cent on a year ago, while imports are up by 7.4 per cent.
Rural exports rose by 1.3 per cent in March while non-rural exports fell by 2.9 per cent.
The main components contributing to the fall in exports were: metal ores and minerals, down $548m (6 per cent). Offsetting the falls was tourism-related services credits which rose $39m (1 per cent).
Within imports, consumer imports fell by 0.7 per cent in March with capital goods imports down 2.2 per cent while intermediate goods imports rose by 2.3 per cent.
Consumer goods imports are up 4.6 per cent on a year ago while capital goods imports are up 14.8 per cent and intermediate goods imports are up by 8.9 per cent.
The net services deficit narrowed by $76 million to $1,000 million in March.
Australia’s exports to China hit a record $100.3 billion in the year to March, up 32.1 per cent over the year and accounting for a record 36.7 per cent of Australia’s total exports. The share of exports going to Japan and the US were at, or near, record lows. In the month of March, Australia shipped goods totalling a record $9.5 billion to China.
Australia’s imports from China hit a record $48.7 billion in the year to March, up 9.1 per cent on a year ago and accounting for 19.6 per cent of Australia’s total imports.
Australia’s rolling annual trade surplus with China rose from $50.1 billion to a record $51.7 billion in March, translating to over $2,200 for every Australian person.

What is the importance of the economic data?

The monthly International Trade in Goods and Services release from the Bureau of Statistics provides estimates on exports and imports of physical goods (such as coal, beef and computers) and services (such as travel receipts). The balance of goods and services (BOGS) is a narrower description of Australia’s external position than the current account estimates. The import data is a useful gauge of consumer and business spending while exports reflect global demand as well as domestic influences such as drought.
The solid trade surplus and further improvements in the domestic economy will support the Aussie currency. Our CBA currency strategies expect the Aussie dollar to rise to US97c by year end.
Anyone placing hope in a rate cut would be relying on a fresh crisis in the global economy. That seems unlikely, although the situation in the Ukraine needs to be watched. In addition if the upcoming Federal Budget cuts too deeply, and adversely affect confidence and spending the Reserve Bank may shift towards an easing bias.
However Central view is that rate cuts are off the agenda, and while there is likely to be an extended period of interest rate stability, more discussion will centre on when the first rate rise will take place. We believe that the next move in interest rates is up, but not until later in the year, say around November and December.

What are the implications for interest rates and investors?

The solid trade surplus and further improvements in the domestic economy will support the Aussie currency. Our CBA currency strategies expect the Aussie dollar to rise to US97c by year end.
Anyone placing hope in a rate cut would be relying on a fresh crisis in the global economy. That seems unlikely, although the situation in the Ukraine needs to be watched. In addition if the upcoming Federal Budget cuts too deeply, and adversely affect confidence and spending the Reserve Bank may shift towards an easing bias.
However Central view is that rate cuts are off the agenda, and while there is likely to be an extended period of interest rate stability, more discussion will centre on when the first rate rise will take place. We believe that the next move in interest rates is up, but not until later in the year, say around November and December.

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Trade Balance – January 2014

Thu, 06 Mar 2014 20:45:44 +0000

The January trade surplus surged to $1433mn, following a smaller December surplus of $591mn.
Exports of goods and services rose by 3.7% over January while imports lifted by 0.8%. Export growth was concentrated in resource exports.
The depreciation of the Aussie dollar is likely to re‑direct offshore spending back onshore which will mean a contraction in imports. Less mining capex related imports will push imports the same way.
Resource exports will remain a dominant part of the export story and will continue to add significantly to GDP growth.

The January trade surplus was much larger than expected, coming in at $1433mn. Market consensus was looking for a surplus around $100mn (CBA (f): $200mn). The trade balance has now been in surplus for three consecutive months, after a continuous moderation in trade deficits over HII 2013. Rising resource exports and falling capital goods imports mean that trade surpluses are likely to continue over the near‑term.

The largest increase in exports in January was in the non‑rural goods category, driven by higher resource exports (+3.2%). The depreciation in the Aussie dollar is positive for Australia’s key bulk commodity exports which are priced in US dollars. Rural exports had another solid month, rising by 4.9% following a surge in wheat exports in the previous month. In January, the rise in rural exports was concentrated in “other rural” (+6.4%) and meat exports (+11.3%). The volatile non‑monetary gold category rose by 44.2% in January, after falling by 28% in the previous month.

The modest rise in imports was a combination of higher intermediate goods imports (+7.8%), a fall in capital goods imports (‑9.4%) and a rise in consumption goods imports (+0.7%). The rise in intermediate imports was driven by a 6.0% lift in fuel imports. This is a direct impact of the lower Aussie dollar lifting fuel prices. Capital goods continue to trend lower as the construction‑intensive part of the mining story slows down. This trend will continue over coming months. The lower Aussie dollar looks to be having a marginal impact on redirecting offshore spending back onshore. The historical experience tells us that this trend will become more apparent as higher import prices work their way into consumer spending decisions.

On a rolling annual sum, exports to China were 37.3% of total goods exports which is the highest level on record. Resource exports will continue to dominate the trade story to China. But, service exports will also be an important. Tourism is the third biggest export earner and education is the 5^th largest. The emergence of the Asian middle income consumer brings the opportunity for an increase in both goods and services exports. History tells us that middle income consumers demand certain goods such as: larger and better quality housing; more and better quality food; and more consumer durables. Middle income consumers also demand certain services such as education and holidays. Education visas are rising and China and India are already the fastest growing component of the Australian tourism market.

Strong growth in resource exports is an important part of the necessary growth transition. This week’s QIV GDP data indicated that net exports made a significant contribution to growth over the quarter. The transition of the mining boom from investment to production phase means that resource exports will continue to make a significant contribution to growth. As the majority of LNG projects finish construction (around 2015), there will be a significant rise in export volumes. Thereafter, iron ore exports will move in the same direction. Large trade surpluses are part of the scenario where we may ultimately switch from current account deficits to surpluses.

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House approvals remain at 18 month lows

Thu, 03 Feb 2011 02:59:19 +0000

Building Approvals; Trade; New Vehicle Sales; PSI

Approvals to build news homes rose by 8.7 per cent in December. However all the gains were centred on apartment approvals – which tend to be volatile. Apartment approvals surged by 23.4 per cent in December after sliding by 8.5 per cent in the prior month.
The all-important private sector new house segement was unchanged, holding at 18 month lows.
Australia’s trade surplus narrowed by $97 million to $1,981 million in December – in line with economist expectations. Australia has chalked up trade surpluses of $19.2 billion over just the past nine months.
The services sector is still going backwards. The Performance of Services index eased modestly from 46.4 to 45.5 in January. Any reading below 50 suggests that the services sector is contracting. The services sector has only expanded for just two months in the past year.
In January, 73,584 vehicles were sold, down by 1.7 per cent compared with a year ago. In seasonally adjusted terms CommSec estimates that sales eased 2.0 per cent in the month. Sales of “other” vehicles like utes, trucks and buses totaled just 13,013 in January – marking the lowest reading in two years.

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Consumers remain super-cautious on spending

Thu, 04 Nov 2010 00:32:34 +0000

Retail trade, International trade

Retail spending grew by just 0.3 per cent in September, below expectations centred on a rise of 0.4 per cent. Non-food retailing rose by 0.4 per cent – the slowest growth in four months.
In the September quarter, inflation-adjusted retail trade rose by 0.7 per cent (below forecasts for 1.1 per cent growth). The measure of retail prices rose by 0.7 per cent in the quarter. Prices fell in 4 of the 15 detailed sectors.
Aussies spent up big on sporting goods in the September quarter and flocked to cafes and restaurants. But spending was down across almost half the retail categories, with specialised food outlets like butchers and seafood stores worst affected together with hardware, footwear, newsagents and clothing stores.
Australia’s trade surplus narrowed from $2,446 million to $1,760 million in September. Economists had tipped a surplus near $1.9 billion. Exports fell by 1.5 per with imports up by 1.4 per cent.
New car sales in October were up just 0.1 per cent on a year ago with 80,925 passenger cars sold in the month. Sales of 4WD vehicles continue to soar up 22.9 per cent on a year ago.