From Westpac:
Australia’s trade deficit widened in the March quarter to a deficit of $3.7bn, a $1.0bn deterioration on the prior quarter. This is the preliminary estimate, released today by the ABS ahead of the balance of payments release on June 2. Australia’s import bill increased by 3.0% in the period, outstripping a 1.9% rise in export earnings.
Our estimates of net exports and the terms of trade are broadly unchanged following this update. Net exports, we calculate, will add 0.1ppts to growth in Q1 (v’s our forecast of 0.2ppts). A slight upside surprise in import volumes more than offsets a rounding-up of exports. The terms of trade declined by 1.2% (vs our forecast of -1.5%), with export prices lower on falling global commodity prices.
Import volumes rebounded by 2.7% in the opening months of 2015, we estimate, thereby reversing a 2.5% decline in Q4. A 4.0% broadly based bounce in goods imports outweighed a further fall in services. Annual import volume growth turned positive in Q1, lifting to 1.4%, the first positive annual read since December 2012.
Export volumes increased by 2.8% in the quarter, on our estimates, with shipments of Australia’s key commodities, iron ore, coal and LNG, rising further as additional capacity comes on stream. Annual export volume growth is an estimated 6%.
Our forecast for Q1 GDP remains 0.6%qtr, 2.0%yr, following the Q4 outcome of 0.5%qtr, 2.5%yr. While Q1 net exports have been trimmed by 0.1ppt, following this update, that is offset by a rounding up of the inventory contribution to reflect the upside on imports.
Here’s how the terms-of-trade will look after the 1.2% decline in the March quarter (shown in green).
