Australia’s Trade Surplus Shrinks Further in August

By Ambar Warrick

Investing.com-- Australia’s trade surplus fell further from record highs in August, data showed on Thursday, as slowing economic activity, particularly in top importer China, weighed on demand for the country’s major commodity exports.

The country’s trade balance was A$8.32 billion ($5.4 billion) in August, the Australian Bureau of Statistics said in a report. The figure was lower than expectations of A$10.10 billion, and also fell below last month’s reading of A$8.73 billion.

Australia’s trade surplus contracted much more than expected in July, plummeting from record highs as slowing economic growth in China pointed to slower commodity demand.

Weakening demand in China weighed heavily on the exports of coal, metals, and minerals, a trend which continued in August, albeit at a slower pace.

The loosening of some COVID-linked curbs in China, coupled with increased stimulus measures is expected to help spur a recovery in the world’s second-largest economy. But markets remain wary of any new COVID outbreaks.

A slowdown in China has weighed heavily on Australia's economy this year, given the former’s space as a top commodities market. Iron ore, copper and coal exports to the country make up a bulk of Australian exports.

Australian imports grew 4% in August from the prior month, overshadowing a 3% rise in exports. Debits from traveling were the biggest drivers of imports, as a post-COVID travel boom in the country continued.

The country is struggling with elevated inflation and rising interest rates, which are expected to weigh heavily on consumer spending in the coming months. The Reserve Bank of Australia had earlier this week raised interest rates by less than expected, citing potential economic headwinds from more monetary tightening.

The Australian dollar rose 0.5% despite the weak trade data, as it benefited from some weakness in the U.S. dollar.