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One last post from me before I sign off and completely hand over to Rach to take you through to the market close.
Trade numbers for September are out from the ABS and there’s both bad and good news in the numbers.
The bad news is that Australia’s trade surplus dropped by nearly $3.4 billion to just shy of $6.8 billion. That’s the lowest it’s been since March 2021.
The good news is that Australia is still posting an historically large trade surplus, and also that the reason it shrank is not so much to do with a fall in exports, which were down just 1.4%, but rather a surge in imports (up 7.5%).
The good news on imports is twofold.
First, it shows demand for goods hasn’t completely collapsed — although the 0.3% rise for consumption goods is pretty tiny when you consider how much inflation is pushing up prices, so the volume of consumer goods imports must surely have fallen.
The better news is that imports were driven higher by a 23.3% jump in capital goods coming into the country, mainly industrial transport equipment.
That is hopefully a sign that businesses are following through with investment plans, and capital goods imports should (in theory at least) be productivity enhancing.
But there is another bit of bad news in the data, about what it might mean for Australia’s economic growth as measured by GDP and whether we can avoid a technical recession.
This from Marcel Thieliant, head of Asia-Pacific at Capital Economics.
“The slump in the trade balance in September increases the risk that the Australian economy entered a recession in the third quarter, but we suspect that a large drag from net trade will have been offset by stock building and a modest rise in domestic demand,” he writes.
“We now estimate that net trade knocked off 1.5%-pts from Q3 GDP growth, which would be one of the largest drags from net exports ever recorded.
“But we suspect that will be mostly offset by a reversal of the unusually large 1.1%-pts drag from inventories in the second quarter.
“So while today’s data increase the risk that the recession we expect to start this quarter already begun last quarter, we suspect that the economy will have continued to expand in Q3.”
Of course, in per person terms, Australia is already in a recession, with GDP per capita having fallen 0.3% in both of the first two quarters this calendar year.
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