Australia's trade deficit unexpectedly narrowed in April because exports of grain, coal and gold increased, which will underpin economic growth as consumer spending slows. The goods and services trade shortfall narrowed to A$1.81 billion ($1.29 billion) from A$1.99 billion in March, seasonally adjusted, the Australian Bureau of Statistics said in Sydney. Imports rose 4 percent and exports increased 6 percent.
Faster economic growth in Australia's largest trading partners has fueled demand for commodities and boosted earnings at exporters such as BHP Billiton and BlueScope Steel Ltd. Farmers harvested a record wheat crop this year as Australia, the world's second-largest exporter of the grain, recovered from drought. ``Firmer global growth will underpin the export recovery,'' said Su-Lin Ong, senior economist at RBC Capital Markets in Sydney. ``This should see a more significant narrowing in the trade gap over the course of the year.''
The median forecast in a Bloomberg News survey of 19 economists was for a A$2 billion gap. Economists are counting on a pickup in exports to spur growth this year as consumer spending slows after the central bank increased interest rates late last year. A decline in exports probably helped slow the economic growth rate to 0.5 percent in the first quarter from the previous three months, according to a Bloomberg News survey of 21 economists.
Export Recovery
``The trade data provides hope that the long-awaited rebalancing of economic growth is under way'' with exports helping spur the economy, Adam Donaldson, senior economist at UBS Australia Ltd. in Sydney, said in a report. Japan's economy grew at a 5.6 percent annual pace in the first quarter, spurred by consumer spending. The U.S. economy grew at a 4.4 percent. They are Australia's two biggest export markets. This month, BlueScope Steel, Australia's largest steelmaker, forecast a 22 percent jump in full-year profit because of a China- led surge in global steel demand. Net income may rise to A$550 million in the year ending June 30, the Melbourne-based company said. The Australian dollar was unchamged at 71.35 U.S. cents at 12:52 p.m. in Sydney trading from before the report. The yield on a benchmark government bond maturing May 2013 was little changed at 5.86 percent.
Interest Rates
The trade report comes a day before the Reserve Bank of Australia's board meets to review interest rates. The bank will leave the overnight cash rate target unchanged at 5.25 percent when it announces a decision on Wednesday, according all 23 economists surveyed by Bloomberg News. The central bank has kept interest rates unchanged this year following increases in November and December. Signs of a slowdown in the housing market prompted the bank to keep rates steady. Australia is the world's largest exporter of beef, coal and iron ore. Exports, which make up one-fifth of the economy, rose 6 percent in April to A$12.45 billion. Non-rural goods exports, which include gold, iron ore and fuel, increased 6 percent. Exports of rural goods jumped 13 percent.
Coal Exports
Coal exports climbed 19 percent from March to A$996 million, and were 9.9 percent higher than a year earlier, as Xstrata Plc and others exporters of Australian coal benefited from a surge in contract prices. Xstrata said last month that prices for thermal coal it exports under contract will rise 68 percent in the year that began April 1. Australian imports rose 4 percent in April to A$14.25 billion. Imports of capital goods, which include machinery, vehicles and telecommunications equipment, increased 4 percent, while imports of consumer goods jumped 5 percent. April is the 24th straight monthly trade gap, the worst run of deficits since 33 months of shortfalls between December 1997 and August 2000. The trade balance has been in deficit because of drought and reduced demand from Australia's major trading partners in the past two years. ///www.bloomberg.com