Trade deficit of Australia has been on a downward trend since January due to a mixture of strong growth in volume and a rebound in prices of export. The trend is likely to have continued in April; although at a slower rate, said Societe Generale in a research report. In March, the value of exports increased sharply by 4.3% m/m.
“We see little scope for another gain in April, notwithstanding a further increase in the price of iron ore in China; which would have been partially offset by the lower coal price”, noted Societe Generale.
China’s weak activity data also indicates towards a more subdued growth in the country’s exports. Imports are likely to have helped improved the balance of trade in April. Imports are expected to have fallen slightly, after recording the first month-on-month growth in six months. This projection is underpinned by a stronger exchange rate. Overall, Australia’s foreign trade report for April is expected to affirm that the declines in price is being dominated by a rise in export capacity, putting the balance of trade on a trend of improvement, according to Societe Generale.
