Another shocking trade deficit number. The Australian Bureau of Statistics reports that Australia’s trade deficit hit nearly $3 billion last month. Go, go, resource boom!
Rising imports were not the culprit this time around. Blame falling exports. The private sector is digging the country up at a record place. But the bottlenecks are choking off that extra production and effectively putting a lid on the export boom. If it weren’t for high metals and mineral prices, the figures would be worse.
The ABS reports that non-rural goods exports fell $166m (or 2%) to $10,594m. We will name and shame the offending weak performers. Exports of metal ores and minerals were down AU$649m (20%). Exports of metals (excluding non-monetary gold) were down AU$267m (22%). Exports of coal, coke and briquettes, down AU$202m (11%).
Is the strong Aussie dollar to blame? Is China pushing back from the mineral dinner table? Or is their a fundamental skepticism (indifference) by state governments in the durability of the boom?
Maybe state governments are slow to expand export capacity because they believe we are nearer to the end of the boom than the beginning. Maybe they prefer a loose control over exports to a hemorrhage that would lead to lower prices and eventually when they cycle turns, excess export capacity. Or maybe they are just poor planners.
Your guess is as good as ours. A weaker dollar or an increase in export volumes (or higher metals prices) would be good for earnings in the first quarter of next year. The share market may forecast a rebound in exports and begin pricing that into stocks.
However we’ve got our eyes on the construction and infrastructure stocks. There are some big ones and some little ones. The big ones have a global footprint and earn money from the petrodollar surpluses in the Middle East. The little ones are local resource plays. Both are intriguing.
The Daily Reckoning Australia