Australia’s trade deficit narrows further in August as services exports rise

Trade deficit of Australia further narrowed in August. Strength throughout both resources and services exports mainly led to narrowing of the deficit. Trade deficit improved to AUD 2 billion from a downwardly revised AUD 2.1 billion in July. This suggests a considerably turnaround from AUD 3.2 billion deficit registered in June, assisted by unchanged import values and growth in resources and services exports, said ANZ in a research note.

Services exports rose solidly again in August, along with significant upward revisions to recent months. The upshot of these revisions is that the resilient Australian dollar does not appear to be weighing on services exports as was anticipated earlier. Services exports have been on a robustly rising trend for four years now and the August data imply that there continues to be significant momentum in the sector.

As projected, resources exports in August were hurt by a large drop in non-monetary gold volumes after spiking in July. However, exports continued to be solid, helped by rise in LNG sector as production in the mega-projects throughout Western Australia and Queensland increases. Export volumes of LNG have risen sharply in the past three months, implying that net exports are expected to strongly contribute to the third quarter economic growth, stated ANZ.

Imports declined in the month by 0.3 percent sequentially. Weakness was clearly seen throughout each of the consumption intermediate and capital goods sectors. The most considerable falls was in fuels and lubricant goods that dropped sharply by 14 percent.