RTTNews - Thursday, the Australian Bureau of Statistics announced that Australia's trade deficit expanded more than expected in July, with the deficit being the largest reported since May 2008. The widening of the deficit was largely because of a fall in exports, accentuated by a rise in imports.
The trade data showed that the deteriorating trade trend continued into July after the Bureau's announcement Monday that the current account deficit had doubled in the second quarter in comparison to the previous quarter. The overall goods and services balance swung to a deficit in the second quarter from a surplus in the first quarter. A drastic fall in exports was cited as the driving force for the expanding current account deficit.
Australia's trade deficit was at a seasonally adjusted A$1.56 billion in July compared to a revised A$538 million deficit in the previous month. Economists were looking for a deficit of about A$880 million.
Exports of goods & services fell 1% on month to A$20.04 billion in July, the report showed. Of this, exports of rural goods fell 4%, while exports of non-rural goods rose 1%. Exports of other goods dropped 22% and services exports fell 1%.
Classifying by components, exports of non-monetary gold witnessed the largest slide, down 22%. Other components that recorded decreases include, exports of cereal grains & cereal preparations, which fell 17%, and exports of metals (excluding gold), down 11%. Regarding services export components, exports of other services dropped 2% and travel services exports were down 1%.
On the other hand, imports of goods & services were up 4% to A$21.60 billion in July. Of this, imports of intermediate & other merchandise goods increased 7% and capital goods imports rose 5%. Further, imports of consumption goods climbed 2%, while services imports were up 1%.
In terms of individual components, imports of fuels & lubricants recorded the most significant increase in July, up 21%. This was mainly driven by a rise in crude petroleum imports, which soared 31%. Other components that witnessed increases include imports of transport equipment, up 30%, while ADP equipment imports were up 12%. In the services sector, imports of other services rose 3%, and travel services imports climbed 1%.
Meanwhile, in a separate report released earlier in the day, the Commonwealth bank of Australia and the Australia Industry Group revealed that the performance of services index, which is a measure of service industry activity, climbed 3.9 points on month to 48 in August. Although the index showed an improvement from last month, a reading below 50 means that the sector is still contracting.
The Bureau announced yesterday that Australia's GDP rose at a faster than expected pace in the second quarter, increasing 0.6% from the first quarter. Analysts had expected a 0.2% rise.
Tuesday, the Reserve Bank of Australia left the benchmark interest rate unchanged at its half-century low of 3%, with governor Glenn Stevens and company deciding that the present accommodative setting of monetary policy was appropriate for the time being. However, the rapid growth of the economy in the second quarter is expected to spur a hike in interest rate in the coming months.
The Australian dollar edged down against most of its major rivals following the release of the trade data. The aussie thus drifted slightly lower against the U.S. dollar and the euro, but it has recouped some of its early losses against the yen.
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