Australia's trade deficit narrowed substantially in April, suggest net exports will make a solid contribution to Q2 GDP

Data released earlier today showed that Australia's trade deficit narrowed sharply to AUD1.6bn from a downwardly revised AUD2.0bn in March. The sum of the trade deficit in the first two months of Q2 is just AUD3.6bn, compared with AUD6.2bn for the first two months of Q1.

In a turnaround from recent months, resource exports fell by 1.3% m/m in April, while non-resource exports rose. A disappointing result for resource exports was offset by non-resource exports. Imports fell by 0.8% m/m, largely reflecting weak imports of capital and intermediate goods.

The official data yesterday showed gross domestic product (GDP) grew 1.1% in the three months to March, accelerating from an upwardly revised 0.7%. "The sharp improvement in the trade deficit in March and April suggests that net exports will make a solid contribution to Q2 GDP," said ANZ in a report.