Australia's trade balance to bounce back from blow-out deficit

The drastic AUD 2.7bn deterioration in Australia's trade balance in April was driven by a slump in export values as well as a surge in imports. Both are expected to have reversed in May. 

On the import side we already have the ABS' estimate of goods imports at -4.6% mom, and along with our estimate of services imports, a decline of around 4.2% mom is expected. On the export side a strong recovery is expected due to the 17% mom increase in the iron price in China (Port of Qingdao), says Societe Generale.

That said, a cyclone affecting Queensland could have dented coal exports. The big picture of Australia's export sector remains unchanged, while volumes are growing strongly and hence boosting real GDP growth, weak export prices are keeping the trade and current account balances in deficit.