Daily Commentary BY THE CURVE TEAM –

Trade Surplus Falls

4th of September, 2020

Trade balance data for July showed a decline in the surplus, which rounds out a big week of data updates.

The trade surplus was $4.6 billion in the July quarter down from $8.1 billion in June, which was lower than the expected $5.4 billion. Exports declined 4.4% and imports were up 6.9%.

The resource sector led the decline in exports, with LNG and coal down 18% and 10% respectively. The fall in iron ore was more muted, down 4%.

It is suggested the rise in imports may reflect supply chain disruptions easing and inventories being topped up. Car imports were up 90% and computing equipment up 26%.

The change in the trade balance has been considered relatively insignificant. The high levels over the past few months reflect China’s hefty infrastructure spending as they recover from Covid-19 and our laggard demand domestically.

As the Chinese economic recovery eases and Australian demand picks up, the surplus should fall closer in line with this month’s read.

Overseas, US initial jobless claims were 881 000 compared to just over a million in the previous week. Although the decline is positive news, the figures remain very large, which does not bode well for a swift economic recovery.

Retail sales for July is out today, which is expected to confirm the preliminary estimate of a 3.3% jump for the month. This would reaffirm one of the few bright spots for the economy since March.

Josh Stewart

Client Relationship Manager