FXStreet (Bali) – Phil O’Donaghoe, Economist at Deutsche Bank, reviews the surprising Australian trade balance report, which saw a significantly wider deficit than expected in April at AUD3.9bn.
Key Quotes
“Bulk commodity exports sharply weaker as severe weather impacts coal exports and a fall in iron ore quantity exports exacerbates lower prices.”
“Coming on the bank of a strong 5.0%qoq lift in export volumes recorded in the Q1 national accounts, the trade deficit for April was significantly wider than we and the market had expected. The deficit printed at AUD3.9bn compared to our (and the market’s) expectation of a 2.1bn deficit.”
“The ‘surprise’ for us was on the exports side. Specifically, a large decline in exports of the bulk commodities. The value of ‘metal ores and minerals’ (i.e. iron ore) exports fell 13.0%mom in April, while coal exports fell 22.1%mom.”
“Taken together, these two commodities accounted for 6.2 percentage points of the 5.7%mom decline in exports. In other words, outside of these two (albeit important) commodities, other exports rose in the month.”
“Digging further, it appears that for iron ore, the weakness in values was driven by the combined effect of: a reduction in export quantities and a (larger) fall in unit prices. This follows price falls in March, but an increase in iron ore export quantities in that month.”
“While the deficit was significantly wider than we expected in April, it appears that (temporary) weather conditions have played an important role behind the sharp fall in coal, while a fall in iron ore export quantities in the month exacerbated the (ongoing) weakness in prices. This ongoing price weakness had been somewhat suppressed in March by a sizeable increase in export quantities.”
(Market News Provided by FXstreet)