January: +$4.5bn; prior: +$3.8bn. Exports +5.0%; Imports +3.3%.
In January, the trade surplus jumped to $4.5bn. This is the second largest surplus on record (in dollar terms) – eclipsed only by a $4.7bn surplus in December 2016.
The January outcome was a $0.8bn improvement on December and exceeded expectations (market median $2.75bn and Westpac $3.1bn).
Imports did rebound in the month, +3.3%, following a 5.5% fall last month (vs a forecast +4%).
Exports were much stronger than anticipated, increasing by 5.0%, up $1.9bn (vs a forecast +2.2%).
Export strength was largely centred on a sharp rebound in gold off a low base, up 174% (we expected a 75% rebound). In dollar terms, gold accounted for $1.4bn of the $1.9bn increase in total exports in the month.
Metal ores and coal both advanced in January, up a combined $0.6bn.
The trade surplus widened in 2018 and in to 2019 on higher export earnings, boosted by rising commodity prices.
Notably, commodity prices have surprised to the high side in part due to supply disruptions having an amplified impact in a market where supply and demand are in relatively tight balance.
The $4.5bn surplus for January compares with a Q4 monthly average of $2.8bn.
The surplus for Q1 as a whole is expected to be a material improvement on that in Q4, with export volumes forecast to rise (following a disappointing second half of 2018) and on a likely further increase in the terms of trade.
