Australian trade surplus shrinks

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Australia's trade surplus almost halved in July, as coal exports declined to China and India, taking off some of the recent momentum on the international front.

The trade surplus fell to A$1.89 billion ($2.4 billion) in July from a revised A$3.44 billion in June, according to the Australian Bureau of Statistics. Analysts had expected a A$3.1 billion surplus for the month.

Goods and services exports dropped 4 per cent, or A$1.19 billion, to A$25.4 billion, while imports rose 2 per cent, or A$359 million, to A$23.5 billion.

Today's surplus drop ''doesn't alter the underlying the picture of a strong turnaround in trade accounts over the last six months on the back of strong commodities prices,'' said Commonwealth Bank senior economist  John Peters.

''Six months ago, we were running large monthly deficits.''

The monthly trade data measures the merchandise and goods and services imported and exported from Australia, comprising a large part of the current account balance.

Data released earlier this week, showed the current account balance improved nearly A$11 billion to a deficit of A$5.6 billion in the second quarter, the narrowest since December 2002. Goldman Sachs estimated the quarterly move was the biggest relative shift since the June quarter of 1961, when Japan's rapid industrialisation help drive demand for Australian commodities.

Yesterday's national accounts figures showed the improving trade position added 0.4 percentage points to the growth of the economy in the June quarter, or about one third of the total.

The impact of China's demand for Australian resources has been the primary force behind the latest commodities export boom, which began in 2005.

China, coal drop

A sharp decline in coking coal exports to China and India contributed significantly to the lower surplus for the month.

Exports were hit by a 27 per cent drop in hard coking coal volumes in July, more than reversing a 9 per cent increase in June, ABS data show.

ANZ economist Riki Polygenis said exports of coking coal to China plunged 77 per cent for the month as the Chinese government closed 40 per cent of its steel industry for maintenance, denting demand for Australia's commodities. Coking coal is used for making steel.

Coking coal exports to India also fell, down 47 per cent, or A$329 million, on the month before.

St George chief economist Justin Smirk described the coal slide as a one-off, probably attributable to a bottleneck in production or a delay in shipping.
 
"We expect to see a recovery in the next couple of months," said Mr Smirk.
 
He compared the drop with a storm-flooding in Queensland's coal mines in February that hit coking coal volumes for the month, only for the decline to be followed by a recovery in March and a surge in April as production came back on line.

The Australian dollar fell on the release of today's trade data from 90.85 US cents to 90.69 US cents before recovering some ground.

- © Fairfax NZ News