How are things goin’ Down Under? Here’s a quick review of the latest economic data from Australia!
As an commodity-driven economy, Australia relies heavily on its raw material exports and perhaps one of the best ways to track the performance in this sector is to look at the country’s trade balance. Unfortunately, the latest trade figures reflected a dismal performance for the export industry.
Australia reported a 1.91 billion AUD trade deficit for May, nearly thrice as much as the 0.78 billion AUD shortfall in the previous month. Not only does this mark two consecutive monthly deficits, but it also means that Australia chalked up its worst trade deficit since January 2013. For the newbies out there, having a trade deficit means that the country had more imports than exports during the period.
A closer look at the components of the trade balance report reveals that the decline in exports was mostly spurred by falling iron ore prices. Economists estimate that commodity prices could continue to decline in the coming months, which might mean bleak prospects for Australia’s trade sector.
Another part of the economy that has been underperforming is Australia’s consumer sector. The latest retail sales report came in the red once more, showing a 0.5% decline for May instead of staying flat. To top it off, the previous month’s report was downgraded from an initially reported 0.2% uptick to show a 0.1% drop.
Looking further back shows that Australia has been printing subpar retail sales figures for the past four months. This is a bit concerning, as jobs data has been coming in consistently stronger than expected prior to the sudden drop in hiring for May.
Components of the latest report showed that the food services and retailing sectors had gains while clothing and department store sales marked declines.
Among the latest reports released from Australia, housing demand data seems to be the most promising. After sliding by 5.8% in April, building approvals surged by 9.9% in May and outpaced the expected 3.1% increase. This is its strongest monthly gain in eight months, effectively bringing the annualized pace of building approvals up by 14.3% in May.
Market analysts predict that the housing and construction sector could be the main driver of growth for the Australian economy over the next few months as gains from mining investment start to slow down. Whether or not the pickup in housing would be enough to make up for the slump in commodity exports and consumer spending remains to be seen.
Despite these weak spots in the Australian economy, RBA Governor Stevens and his men kept their heads up in the latest monetary policy announcement. Policymakers highlighted the pickup in investment intentions and expressed confidence that inflation will remain consistent with their target.
Do you think Australia’s data is painting a different picture from the RBA outlook? Share your thoughts in our comment box or cast your votes in our poll below!