Australia's Trade Deficit Widens 54% in January as Bad Weather Hits Coal Exports

Australia's trade deficit has widened significantly in January due to lower commodity exports and increased imports, according to official data.

The Australian Bureau of Statistics (ABS) said that the seasonally-adjusted trade deficit widened 54 percent to A$1.06bn (US$, £) in January from a revised A$688m in December. Economists were expecting a trade deficit of A$500m.

Total exports declined 1 percent on a seasonally-adjusted basis to A$25bn, while imports rose 1 percent to A$26bn.

Coal exports in the month have been hurt by adverse weather conditions in Queensland, which resulted in the closing of ports and mines, while rail links were shut down due to flooding.

Economists said the results were worst-than-expected, but they anticipate the country to go back to trade surplus in the next few months on higher commodity prices and increased mining activity.

"It looks like the coal exports numbers and a couple of other things on the non-rural side have come in weaker than expected," ANZ head of Australian economics Justin Fabo said.

"It's a bit worse than expected but we think the trade balance will get better through this year, just because of better export volumes."

Fabo noted that a slump in coal prices has affected exports, and the recent improvement in coal prices would help trade balance in the coming months.

The fall in coal exports was due to flooding in Queensland during January, according to National Australia Bank senior economist Spiros Papadopoulos.

"We knew coal exports were going to take a bit of a hit during the month so it was on the cards that we'd get a bit of a deterioration during January,'' Papadopoulos said.

He added that the trade figures would improve during the first few months of 2013.

"We are seeing an improving trend coming through in the trade deficit and in coming months we expect that our exports will continue to improve and we'll get closer to the zero line,'' he said.

Despite the short-term weather disruptions, trade balance is expected to improve due to continued Chinese demand from Australian resources.

"Australia's trade balance should see some improvement later this year, provided the Chinese recovery remains on track and the Australian dollar does not appreciate significantly," Australian Associated Press quoted, St George economist Janu Chan as saying.

On 6 March, ABS reported that Australia's economy has expanded 0.6 percent in the final three months of 2012 helped by higher public investments and increased exports.