The prospect of the first trade surplus in 40 years or more has moved another month closer with the publication of yesterday’s March trade data showing a surplus of $3.1 billion.
While that was down on the record $3.7 billion in February, the previous record – December’s was up graded to a new all time high of $4.5 billion from $3.7 billion.
Exports rose 2.0% in March, while imports were up 5.0%. The surplus is expected to shrink in April due to disruptions to coal exports caused by Cyclone Debbie.
The revision to December and the March figure means the running surplus for the year so far has topped the $10 billion mark and is around $10.5 billion.
The news had no positive impact on the dollar which fell under 74 US cents in trading overnight.
The positive statement from the US Fed yesterday morning and the almost certain rate rise in June (providing the April US jobs figures tonight are solid) sent the dollar lower.
The ANZ Bank said in a note that; “This is the third largest trade surplus recorded since the series started in 1971. The improvement in the trade balance over the past three months strongly suggests that the current account will likely post a surplus in Q1 2017, which will be the first surplus since 1975.” And the Commonwealth Bank said
We now expect the Q1 Current Account to be a tiny surplus of $0.2bn. It will be the first surplus since Q2 1975. It is caused mainly by the large trade surpluses delivered by higher bulk commodity prices over the last few quarters. So it looks unlikely to be repeated in subsequent quarters.
We also expect net exports to detract about 0.4 percentage points from Q1 GDP (on 7 June). It appears that there were stronger capital goods imports volumes in Q1. It could mean an offsetting lift in capex spending as well.
Some economists took fright at the sharp rise in imports of consumer goods in March
For example Capital Economics said:
The fall in March had nothing to do with export values, which rose by 2.4% m/m. Instead, it was a result of a 4.6% m/m rise in import values. That was mainly due to a 10% m/m increase in imports of consumption goods, which would be encouraging if it’s a sign of stronger domestic demand. But we won’t know for sure for another month or so as it may also be the case that imports are being distorted by problems seasonally adjusting for this year’s earlier timing of Chinese New Year.
The international trade surplus is well past its peak and will probably continue to fall in the coming months. What’s more, the nominal surplus in the first quarter won’t prevent net exports from subtracting from real GDP.
But Citibank economists pointed out that … “the 9.7% rebound in consumption goods offset the decline in February and will be a welcome development. With imports of clothing, footwear, vehicles, food and beverages recovering strongly, any fears from the February data that businesses were expecting a deceleration in the pace of consumer spending could be forgotten.”
