Australia: Trade surplus hits record high on higher iron ore price - Westpac

Andrew Hanlan, analyst at Westpac, notes that the Australia’s trade surplus climbed to a record high of $4.8bn in February, up from $4.35bn in January, eclipsing the previous record of $4.6bn in December 2016.

Key Quotes

“The February result exceeded expectations (market median $3.7bn and Westpac $3.8bn).”

“Imports surprised to the low side, declining by 1.1%, whereas we anticipate a rise of 1.1%. A drop in fuels was the source of weakness.”

“Exports provided an upside surprise, increasing by 0.2% vs a forecast decline of 0.9%. Notably, the expected pull-back in gold failed to materialise.”

“More fundamentally, a key dynamic driving a widening of the trade surplus is the boost to export earnings from higher commodity prices, notably for iron ore and coal. “

“Total exports in February are 13.2% above the level of a year ago, outstripping a 4.4% rise in imports.”

“The trade surplus in the March quarter to date is running at $4.6bn a month, well up from $2.9bn per month in the December quarter. The bulk of this improvement likely reflects higher commodity prices.”