The Australian Bureau of Statistics (ABS) has just released trade data for the month of March, and it’s an absolute shocker. In seasonally adjusted terms, the balance on goods and services recorded a deficit of $1,587 million in March 2012, a rise of $833 million on the deficit recorded in February 2012 (revised upwards from $480 million).
The market had expected a trade deficit of $1,300 million, so the result came in worse than expected, shaving half a cent from the Australian dollar.
The poor trade result was driven primarily by a sharp increase in imports. In seasonally adjusted terms, goods and services credits (exports) rose by $392 million (2%) to $24,521 million, whereas goods and services debits (imports) rose by $1,224 million (5%) to $26,107 million.
Australia’s two key exports – iron ore and coal – showed little movement over the month, but remain well below recent highs (see below chart).
Iron ore retained its status as Australia’s premier export commodity by value in March, accounting for 21% of total merchandise exports versus coal’s 16% share (see below chart).
China and Japan retained their status as Australia’s two key export markets, accounting for $6,067 million (29%) and $4,052 million (19%) of exports over the month (see below charts).
Given their status as Australia’s major producers of iron ore (Western Australia) and coal (Queensland), Western Australia and Queensland continued to dominate the nation’s exports in March (see below chart).
However, Western Australia (+$1,447 million), New South Wales (+$935 million) and Victoria (+$386 million) experienced large increases in imports, which drove the nation’s trade balance down over the month (see below chart).
Finally, Australia’s services trade balance actually improved by $28 million over the month, driven by an increase in services exports of $156 million, which more than offset an increase in services imports of $128 million. Nevertheless, Australian services exports remain in a downtrend, which began in late 2008 on account of the high Australian dollar (see below charts).
Overall, Australia recorded a trade deficit of $3,184 million over the first quarter of 2012, which fully reverses the $3,115m million surplus recorded over the December quarter of 2011. Accordingly, the shift from surplus to deficit over the first quarter should shave around 0.9% from the upcoming March quarter GDP print.
