Australia's trade data suggest Q2 net exports contribution close to zero

Monthly trade data, which are in nominal terms, painted a dismal picture of foreign trade in Q2, exports slumped by 5.5% qoq, while imports rose another 0.8% qoq, notwithstanding a 3.0% surge in Q1. 

"Mechanically applying these to the trade data produces a 1.1% qoq decline in exports and a 0.6% qoq decline in imports, which would imply a small negative contribution from net exports to quarterly GDP growth. This is not our forecast, the described method is quite accurate for imports, but less so for exports. Hence, a smaller decline is expected in export volume (0.5% qoq), pointing to a very small positive net export contribution of 0.04pp (0.2pp annualised)", says Societe Generale.

However, price changes had much to do with it, according to data from the ABS, export prices declined 4.4%qoq, while import prices rose 1.4%. 

"The current account deficit, meanwhile, is expected to have widened to around AUD16bn in Q2, around 4% of quarterly GDP, from AUD10.7bn in Q1, the largest shortfall since Q1 2012 (around 4% of GDP). But this is expected to be the low point in the balance for the foreseeable future, as exports are likely to continue to grow and imports should reverse their somewhat baffling recent strength", added Societe Generale.