The Reserve Bank has been warning that our stellar March quarter trade performance might not last – but did we really expect the trade boom to be over so soon in April?
The trade data for April from the Australian Bureau of Statistics revealed a shock deficit of $122 million.
The RBA said that falling prices and weakening demand for commodities, especially iron ore and coal, would see the high volume of exports in the March quarter slow over the rest of this year.
"But smaller increases in such exports are likely in coming quarters," RBA Governor Glenn Stevens warned in his post-meeting statement on Tuesday.
Iron ore prices fell in April and continued falling in May to a low last Friday of $US91.80.
Since then the price has recovered to be just over $US94 a tonne.
Now that’s a big miss, but the trade data from the ABS seems to have been incomplete with some figures on the exact size of the fall in the seasonally adjusted result not given.
Nominally the turnaround into deficit was $780 million from the figures provided by the ABS.
But the exact figure wasn’t provided in yesterday’s seasonally adjusted data (there was a $3 million fall in the trend surplus from March to April).
The ABS said that was due to the “unit values" for iron ore and coal exports "for the latest month have been suppressed due to the size of the value adjustments”, a footnote to the data said yesterday.
Trade balance swings back into the red in April
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Yesterday’s report also revealed that valuation adjustments had changed previously reported figures.
The ABS said that in original terms "a negative $300m adjustment has been applied to the metal ores and minerals component in the balance of payments series for April 2014. The previous negative $900m adjustment applied to March 2014 remains. And "a negative $100m adjustment has been applied to the coal, coke and briquettes component in the balance of payments series for April 2014."
The ABS said it constantly updates data, especially for coal and iron ore exports, hence the changes detailed above in the April report (and the one for March remaining in place).
The ABS said that exports fell 1% in April, while imports rose 2%.
Economists reckon the fall into deficit in April was caused by the drop in iron ore prices being faster than the increased export volumes.
Iron ore exports to China from Port Headland were up 1 million tonnes in April to 29.9 million tonnes from March. They were more than 30% ahead of May 2013.
Iron ore prices fell more than 12% in April.
Iron ore prices actually peaked for the year on April 9 at $US120 a tonne.
