Australia’s trade surplus rose close to a record high in February, but weaker imports and commodity prices reveal risks to economic growth, economists say.
The trade surplus rose to $3.6 billion – the second highest level ever – from $1.5 billion in January, according to seasonally adjusted figures from the Australian Bureau of Statistics.
Exports – mainly coal and iron ore – rose by $469 million, or 1.5 per cent, but the big driver was a $1.6 billion, or five per cent, slump in imports, mainly in consumer and producer goods.
Citi economists said the Reserve Bank of Australia will be concerned about February falling imports as they indicate weak household spending, which accounts for about 60 per cent of gross domestic product.
“This data comes one day after the disappointing retail sales numbers that showed an ongoing decline in discretionary spending,” they said.
“With businesses paring back consumption imports in February, it looks as if consumer-facing businesses are expecting a continuation of soft household spending.”
UBS economists also noted that commodity prices have been the main driver of Australia’s trade surplus over the past year but warned export values have been down in recent months and are set to dip further after Cyclone Debbie hit Queensland last week.
Rail closures caused by flooding from Cyclone Debbie could last up to six weeks and knock out about $2 billion worth of coal exports in March and April, the UBS team said.
“While at face value, this implies a notable hit to second quarter real GDP growth, there is likely to be a much faster recovery in production, and some offset from inventories and reconstruction,” they said.
UBS economists expect the overall impact of Cyclone Debbie to be much smaller than Cyclone Yasi in 2011, which hit the mining, agriculture and tourism sectors hard.
Yasi was estimated by the RBA to have wiped 0.75 per cent from that year’s March quarter GDP, when the economy contracted by 1.2 per cent.
JP Morgan economist Tom Kennedy said he has been expecting coal prices to gradually slide through this year, so any sustained lift in pricing caused by supply disruptions could boost Australia’s terms of trade outlook.
Overall, however, a fall in coal export shipments was expected to be a drag on second quarter GDP growth.
“That said, we are not yet able to quantify the impact on GDP, with the true extent of the damage not yet known,” Mr Kennedy said.
“We expect the RBA to look through much of this weakness given the transitory nature of the disruption.”