By Ambar Warrick
Investing.com — Australia’s trade surplus shrank more than expected in January, data showed on Tuesday, as a small increase in exports was largely offset by a spike in imports on a sharp increase in automobile shipments.
Australia’s trade balance showed a surplus of A$11.69 billion (A$1 = $0.6731) in January, which was lower than estimates of A$12.50B, as well as December’s reading of A$12.24B.
While overall exports rose 1% from the prior month, they were largely held back by a dip in exports of coal, which is one of the country’s top products. Exports of metals ores, however, rose nearly 13% in January from the prior month.
Australia’s commodity exports are expected to pick up in the coming months, driven largely by an economic recovery in China. The country is Australia’s biggest trading partner, and is expected to spur a rebound in commodity demand after it relaxed most anti-COVID restrictions earlier this year.
Chinese trade data due later in the day is expected to shed more light on this trend.
Australian imports jumped 5% from the prior month, with automobile imports surging nearly 31% through the month. But a sharp increase in industrial transport equipment also contributed to the higher import figure.
The trade data suggests that local demand still remains robust in Australia, despite increasing headwinds from high inflation and rising interest rates. This, coupled with a potential recovery in Chinese demand, could help keep the Australian economy in growth territory over the coming months.
Australian economic growth slowed sharply in the fourth quarter, but remained in expansion on the strength of its exports. The country is the world’s largest iron ore producer, and the second-largest coal exporter.
Still, strength in the Australian economy gives the Reserve Bank enough headroom to keep raising interest rates. The bank is set to hike rates by another 25 basis points later in the day, as it moves to contain runaway inflation.