Australia's robust imports and weak export prices keep trade deficit elevated

According to the official advanced estimate, imports were practically unchanged in July from June (0.2% mom), meaning that they remained at a high level, and were up by around 4.5% yoy. That said, all of this gain, and more, can be explained by the exchange rate, which in trade-weighted terms was down 13.5% yoy in July. 

The volume of imports was estimated about flat over the past year, with the difference explained by weakness in commodity prices, specifically oil, of which Australia is a net importer. Exports, meanwhile, are expected to have continued their recovery after the 8.1% decline they suffered in March/April, but faced a serious headwind in July as the price of iron ore plummeted 17% from June (Port of Qingdao). 

"Still, China's July figures for imports from Australia jumped to -4.5% yoy from - 26.5% in June, a move that can only partly be explained by a base effect. Overall, a muted 0.5% increase is expected in exports. As a consequence, the trade deficit should only improve fractionally", says Societe Generale.