The drastic AUD2.7bn deterioration in Australia's trade balance in April was driven by a slump in export values as well as a surge in imports. Both are expected to have reversed in May.
"On the import side we already have the ABS' estimate of goods imports at -4.6% mom, and along with our estimate of services imports, a decline of around 4.2% mom is expected", estimates Societe Generale.
On the export side a strong recovery is expected due to a 17% mom increase in the iron price in China (Port of Qingdao), says SocGen. That said, a cyclone affecting Queensland could have dented coal exports.
The big picture of Australia's export sector remains unchanged: while volumes are growing strongly and hence boosting real GDP growth, weak export prices are keeping the trade and current account balances in deficit.
