According to the official advanced estimate, Australia's imports were practically unchanged in July from June (0.2% mom), meaning that they remained at a high level, and were up by around 4.5% yoy. That said, all of this gain - and more - can be explained by the exchange rate, which in trade-weighted terms was down 13.5% yoy in July. The volume of imports was about flat over the past year, with the difference explained by weakness in commodity prices, specifically oil, of which Australia is a net importer.
Exports, meanwhile, are expected to have continued their recovery after the 8.1% decline they suffered in March/April, but faced a serious headwind in July as the price of iron ore plummeted 17% from June, notes Societe Generale. Still, China's July figures for imports from Australia jumped to -4.5% yoy from -26.5% in June, a move that can only partly be explained by a base effect.
"Overall, a muted 0.5% increase in exports is expected. As a consequence, the trade deficit should only improve fractionally", says SocGen.
