Australia’s export volume has continued its upward trend; however, the upcoming May data is expected to show a short-term setback, noted Societe Generale in a research report. The trade deficit is likely to show a reversal in the narrowing trend. In March, non-monetary gold exports had increased sharply by AUD 659 million and rose slightly further in April by AUD 141 million.
However, the exports are flat in the medium term. This is one of the factors suggesting that the value of exports declined in May. Another factor signalling the decline is the prices of iron ore that reached a peak in April, and declined 9 percent in May in USD terms, said Societe Generale. Even if iron ore’s export prices are not consistent with short-term developments in the delivery prices at Qingdao, it suggests certain decline in value of iron ore exports.
Meanwhile, imports are expected to have continued with their downward trend in May. Resource investment is likely to have witnessed continued declines, but possibly lesser in May than on average in the earlier six months. The AUD’s sharp depreciation before and after the Reserve Bank of Australia’s May decision to lower policy rate is expected to have underpinned imports prices, according to Societe Generale.
“Our AUD 1.9 billion deficit forecast is in line with the March outturn, but would still be consistent with the recent trend towards narrowing deficits,” added Societe Generale.
