Rising Oil Puts Australian Trade Balance Back in Deficit

Australia's trade gap widened more than economists expected, showing a shortfall of -A$965 million versus a narrow A$12 million surplus in the preceding month. The deterioration was driven by a 6% jump in imports. Fuel imports led the rise, gaining a whopping 17% as oil prices continued to soar. Imports of consumer goods rose a respectable 7.8%, in line with yesterday's surprise improvement in May's Retail Sales figures. As we had written about that release, " [the] improvement in retail activity comes in the same month that economy lost -19.7k jobs. While some may interpret this as indicative of Australians’ confidence in finding new employment and thereby make a statement about the resilience of the labor market, it should be noted that some lag is to be expected before job losses translate into reduced disposable income expectations and depress consumption."

The pace of export growth plunged lower nearly seven-fold to show a mere 1.5% expansion since April, when they rose an impressive 10.1%. Exports had suffered in the first quarter as severe rains caused floods that disrupted shipping routes. As weather conditions improved to start the second quarter, producers of coal and iron ore rushed to return to previous shipment levels, boosting export growth rate readings. May's figures suggest this catch-up leap has leveled off.

Going forward, we expect a decline in private consumer demand to take some of the steam out of import growth. That said, the oil rally shows no signs of weakness as of yet and fuel costs will likely continue to boost imports in the near term. With a leveling off in export growth, last month's surprising surplus looks to have been a one-off affair.

DailyFX

Disclaimer

Investment in the currency exchange is highly speculative and should only be done with risk capital. Prices rise and fall and past performance is no assurance of future performance. This website is an information site only. Accordingly we make no warranties or guarantees in respect of the content. The publications herein do not take into account the investment objectives, financial situation or particular needs of any particular person. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision on the basis of the recommendations in this website. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. All intellectual property rights are the property of Daily FX. Daily FX and its affiliates, will not be held responsible for the reliability or accuracy of the information available on this site. The content herein is provided in good faith and believed to be accurate, however, there are no explicit or implicit warranties of accuracy or timeliness made by Daily FX or its affiliates. The reader agrees not to hold Daily FX or any of its affiliates liable for decisions that are based on information from this website. Daily FX highly recommends that before making a decision, the reader collects several opinions related to the decision and verifies facts from at least several independent sources.