Australia’s September Trade Surplus Narrows on Export Drop

Australia’s trade surplus narrowed more than economists predicted in September as gold shipments abroad dropped faster than a slowdown in fuel imports.

Exports exceeded imports by A$2.56 billion ($2.65 billion), from a revised A$2.95 billion surplus in August, the Bureau of Statistics said in a report in Sydney today. The median estimate in a Bloomberg News survey of 24 economists was for a surplus of A$3 billion.

Australian trade balance may weaken further as prices decline for iron ore, the nation’s most valuable overseas shipment, and global growth slows in response to Europe’s sovereign-debt crisis. Today’s report indicated export volumes that were almost flat last quarter may have been a drag on gross domestic product during the period, economists said.

“Net exports look like they’re going to detract reasonably significantly from third-quarter growth,” said Su-Lin Ong, head of Australian economic and fixed-income strategy at RBC Capital Markets in Sydney. “What was shaping up as a pretty reasonable quarter of growth is now looking a lot softer.”

The Australian dollar stayed lower after the data, trading at $1.0350 at 1:18 p.m. in Sydney from $1.0379 late yesterday in New York.

Gold Exports

Exports dropped 3 percent to A$27.3 billion, led by a 24 percent fall in non-monetary gold and a 7 percent decline in other mineral fuels that include natural gas, today’s report showed. Imports slid 1 percent to A$24.8 billion on a 12 percent drop in fuels and lubricants, the report showed.

“The problem is going forward we know prices are going to drop a fair way,” Ong said, referring to iron ore and coal. “You may get some recovery in volumes in October but the price component is coming off.”

The Reserve Bank of Australia, which lowered interest rates last week for the first time in 31 months, said Nov. 4 that “some decline” in commodity prices appears to be under way.

RBA Governor Glenn Stevens lowered the overnight cash rate target to 4.5 percent from 4.75 percent on Nov. 1, saying after the decision that confidence is “subdued outside the resources sector.” Investors are betting there is at least a 92 percent chance Stevens will reduce borrowing costs next month, interbank cash-rate futures showed.

Electrical Goods

Today’s report also showed imports of consumption goods declined 3 percent in September, the biggest slide since April, led by a 15 percent drop in household electrical items. That may reflect a 10 percent fall in the currency in the month in response to Europe’s deepening crisis.

Australia’s exports and a A$430 billion pipeline of resource projects helped spur the local currency to $1.1081 on July 27, the highest level since it was freely floated in 1983.

Europe’s fiscal troubles have weighed on the so-called Aussie in recent months. The world’s fifth most-traded currency fell 10 percent last quarter on concern Greece would default and trigger a repeat of the 2008 credit freeze after the collapse of Lehman Brothers Holdings Inc.

China is Australia’s biggest trading partner and its demand for iron ore, coal and energy has driven the nation’s terms of trade, or export prices relative to import prices, to a record. On Nov. 1, the China Federation of Logistics and Purchasing said a manufacturing index fell in October for the first time in three months.

Terms of Trade

The central bank said in a Nov. 4 quarterly policy statement that “recent falls in commodity prices and the slowing in global demand suggest that the peak in the terms of trade has now been reached and indeed the recent significant falls in the price of iron ore suggest that the decline could be happening a little faster than earlier expected.”

Separately, a private report today showed business confidence strengthened to a five-month high in October as businesses bet correctly the Reserve Bank would lower rates.

The confidence index improved to 2 last month from a revised reading of minus 1 in September, according to a National Australia Bank Ltd. survey of more than 400 companies from Oct. 25-31 that was released in Sydney today. The business conditions gauge, a measure of hiring, sales and profits, slid to minus 1 from 2.

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