AUD: Lower imports, higher exports to trim the deficit – SocGen

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Feb 2, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    FXStreet (Delhi) – Research Team at Societe Generale, suggests that Australian preliminary official data indicate that goods imports declined for a second successive month in December, and at a notably faster pace than in November (-2.0% mom vs -0.8%).

    Key Quotes

    “We estimate that imports of services also slowed – most notably through reduced tourism abroad, albeit at a more moderate rate (-0.5% mom) than imports of goods. An important point to note is that we do not regard weaker imports as a sign of failing momentum in general domestic demand in Australia, but rather as a reflection of the fast-fading investment resource boom.

    This is reflected in the fact that capital goods imports are weak, along with intermediate goods, whereas imports of consumer goods are growing very strongly. At the same time we expect exports of goods and services to have expanded moderately, notwithstanding another sharp decline in commodity prices in general and in iron ore prices in particular in December (-13% mom in USD terms, -15% in AUD terms). Still, as new capacity comes on stream – the first shipment of iron ore from the new giant Roy Hill mine left port in December – commodity exports are likely to increase further. In addition, the strong growth in inbound tourism is likely to have been sustained.

    If our export and import forecasts are about right, and barring serious revisions to Oct./Nov. data, Q4 export growth would come to something like -1% qoq, while import growth would be positive at around 0.8%. However, these are nominal figures, and with export prices down another 5.4% qoq and import prices down just 0.3% qoq, real export growth of around 4.5% should have far outpaced real import growth of around 1%. This would suggest a net export contribution of 0.5-0.75pp to quarterly GDP growth.”
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