By Ambar Warrick
Investing.com-- Australia’s trade surplus tumbled from record highs in July, data showed on Thursday, with exports contracting as overseas demand for coal and metals appeared to be waning.
Australia’s trade balance fell to 8.73 billion Australian dollars ($5.87 billion) from a record high of A$17.67 billion in the prior month, the Australian Bureau of Statistics (ABS) said in a report. The reading was also well below estimates of A$14.50 billion.
The surprise drop in trade balance was underlined by a 10% contraction in exports from the prior month. A fall in the exports of coal, metals and minerals was the biggest factor in the decline.
Imports also rose 5% from the prior month, driven by rising travel debits after the country relaxed all COVID restrictions earlier this year.
Australia’s large drop in exports is likely tied to weakness in China, its largest export destination. Steady exports to the country saw Australia log a record trade surplus in June.
China on Wednesday logged a sharp decline in its trade surplus for August. Imports in the country barely grew through the month.
China is struggling with weakening economic growth in the face of continued COVID lockdowns in its biggest economic hubs. A lockdown in commodities hub Yiwu had disrupted metal and oil trade last month.
A slowdown in China could potentially spill over into Australia, given the country’s role as a key commodities market.
The Australian economy grew slightly less than expected in the second quarter of 2022, data showed on Wednesday. A further slowing in commodity exports- Australia’s largest economic driver- could worsen economic conditions.
The Australian dollar reacted negatively to Thursday’s reading, trading down 0.5% at 0.6737 to the dollar by 21:56 ET (01:56 GMT).