Australia: Q2 activity more robust than expected – TDS

Australia’s May trade surplus was a blockbuster $A2.47b, defying TDS expectation for a trade deficit, according to the analysts at TDS.

Key Quotes

“Our forecast was guided by the soft May Chinese trade report, where imports from Australia fell –12%/m while the ABS claims that exports to China jumped by 9%/m.”

“Australia’s trade surplus with China continues to expand although #2 Japan and #3 India are also expanding this year. Australia continues to post decent trade deficits against Europe and the U.S.”

“The Apr/May average sees goods exports –4% below Q1, while services exports are +3.3%/qtr. The RBA commodity price index is -5.3% over Apr/May hence export volumes are rising. Our tracking for Q2 terms of trade is –4.6%/qtr while we see net exports adding up to +0.3%pts to Q2 GDP.”

“Now that we have Apr/May activity data for the consumer (Q2 ave +1.2%/qtr over Q1) and trade, and this speaks to us that the Treasury/RBA assumption that the impact of Cyclone Debbie will shave ¼%pt off Q2 GDP is likely unfounded and our GDP tracking so far is +0.8%/qtr, or 1.8%/yr.”

“None of these calculations impact our view that the RBA is on hold this year, but a more upbeat tone from the Bank could emerge before the year is out.”