Australia’s trade deficit widens in October on strong growth in imports

Australia’s trade deficit widened more than expected in October. In October, the nation’s trade deficit broadened to AUD 1.54 billion. The widening in the deficit was mainly driven by solid growth in import that countered more modest growth in exports. The deficit broadened from an upwardly revised AUD 1.27 billion in September. This was in contrast to market consensus of a deficit of AUD 800 million.

Following three straight months of decline, imports accelerated strongly by 2.3 percent in October. The main driver was a sharp increase in imports of capital goods, where transportation equipment imports were up sharply by 38 percent. Consumption goods imports also rose 1.3 percent, partly reversing the previous months decline. This is in line with the rebound in retail sales in the past couple of months and is encouraging for the consumer spending outlook for the fourth quarter.

Total exports increased moderately in October by 1.4 percent, with both resources and services exports picking up. The strength in exports was partially due to the volatile non-monetary gold series, which were up 13 percent in the month.

The strength in exports was focused in resource exports, which rose 2.3 percent, with particular strength in other mineral fuels that includes LNG that rose 11.5 percent and coal exports, which increased 7.5 percent month-on-month. Services exports also increased strongly by 2 percent. Meanwhile, rural goods exports and manufacturing exports dropped in the month.