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Australian GDP the highest since 2012
AUD rebounds with higher GDP expectations
Australia's Trade Balance is within striking distance of returning to surplus for the first time since March 2014. Back then, AUDUSD was trading at 0.9260 having posted a monthly gain of 3.6%. Today we find the currency cross sits below 0.7300 with many analysis (ourselves included) expecting a lower dollar later this year.
However, within the numbers we see that exports have risen by 1% and imports have declined by 1%. This is good news which backs up the strong GDP data released yesterday but is a trend that needs to pick up pace if it is to counteract the loss of the mining industry all together. A lower Australian Dollar should help exports continue to rise and imports continue to fall, helping to support growth in the process. With Iron ore now sitting at 3-month lows and accelerating to the downside, then a hawkish FED should help the Australian Dollar move lower, with exports and growth higher.
This makes it the fourth monthly consecutive advance for trade balance whilst in deficit. The last time it achieved four consecutive gains the trade balance was in surplus but it was a shortly lived affair. The last time this stat was achieved whilst in deficit was back in 2001, so we keenly await to see exports continue to rise in tandem with a lower exchange rate.
Looking further out we have included a YoY% change for exports (blue shaded) and imports (red line chart). The worrying sign here over a longer-term outlook is the similarity it displays when compared with global GDPs and trade data; Demand appears to be within a cyclical downturn. So whilst the trade balance data today is positive in the near-term, it should be taken in context of the bigger picture which is one of slowing demand and global growth. This further highlights the need for export countries such as Australia and New Zealand to remain competitive, which requires a lower exchange rate and is usually fuelled by easing monetary policy.
Retail sales was also released which saw a 0.2% gain vs the 0.3% consensus and down from 0.4% previously. Whilst the data is below par we can see there are positive signs among consumers. Retail sales has not contracted since March '15 so we keenly await to see if it can remain above this critical threshold to denote consumer spending.
- Cafes, restaurants and takeaway food services: 1%
- Household goods retailing: 0.3%
- Clothing, footwear and personal accessory retailing: 0.5%
- Other retailing: 0.2%
- Department stores: 0.4%
- Turnover in food retailing: -0.3%
Australian Trade balance beats expectations
Exports rose and imports declined to help back-up the positive data from yesterday's GDP read.