Australian Trade Surplus Slides on Surge in Capital Goods Imports

Highlights

• The Australian trade surplus narrowed sharply to A$6.786 billion.
• A sharp increase in the imports of capital goods and a slide in non-monetary gold exports impacted trade terms.
• Home loans unexpectedly fell by 0.1% in September.

Australian Trade Surplus Narrows on Import Surge

On Thursday, Australian trade data drew investor interest. Recent Australian inflation and consumer spending figures raised bets on an RBA rate hike to curb inflation. However, an uncertain macroeconomic environment could force the RBA to take a more cautious rate path.

The Australian trade surplus narrowed from A$9.64 billion to A$6.786 billion in September. Economists forecast an A$9.40 billion surplus.

According to the ABS,

• Exports tumbled by 1.4% (A$658 million), impacted by non-monetary gold.
  • The export of general merchandise increased by 2.1%.
  • Non-monetary gold exports tumbled by 39.2%.
• Imports surged by 7.5% (A$2,716 million), attributable to industrial transport equipment imports.
  • Consumption goods imports rose by 0.3% (A$35 million).
  • Non-monetary gold imports increased by 39.7% (A$237 million).
  • Capital goods imports surged 23.3% (A$1,927 million).

The trade figures are significant, considering an Australian trade-to-GDP ratio of over 50%. While investors can discount a likely one-off import of industrial transport equipment, falling exports signaled a weak demand environment, discounting non-monetary gold exports.

Home loan figures for September were also disappointing, falling by 0.1%. Economists forecast a 1.2% increase following a 2.6% jump in August.

Aussie Dollar Reaction to Trade Data

Ahead of the Australian trade data, the AUD/USD fell to a low of $0.63867 before rallying to a high of $0.64306.

In response to the numbers, the AUD/USD rose to a high of $0.64288 before falling to a low of $0.64210.

This morning, the Aussie dollar was up 0.45% to $0.64221.

Next Up

Later today, the US labor market will be in the spotlight. US jobless claims, nonfarm productivity, and unit labor costs will influence investor appetite for the US dollar.

Unexpectedly high unit labor costs and a drop in jobless claims could increase expectations of a December Fed rate hike. On Wednesday, Fed Chair Powell discussed the need for softer labor market conditions and weaker growth to restore price stability. Counter trends would force the Fed to take a more aggressive rate path to tackle inflation.