Australia's import strength to boost trade deficit again

There is nothing wrong with the momentum in Australia's exports - with 3m-o-3m growth of 2.2% up to January (9% annualized) - especially considering the persistent weakness of commodity and hence export prices; but owing to surprising strength in imports the trade deficit has again been widening, and is likely to continue to have done so again in February.

According to the ABS' advanced estimate, goods imports rose 2% in February from January, with the increase quite evenly distributed across intermediate, consumption and capital goods. This suggests that exchange rate effects played a significant role in the strength of import values.

Societe Generale says that they expect exports to have continued to perform rather well, though the risks are probably skewed to the downside given the fact that the Lunar New Year fell in February this year as opposed to January in 2014 - an effect that in many Asian economies has boosted exports in January only to depress them in February.