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Forex News Flash: Australia: Trade deficit widens, but iron ore exports increase.
Economist Charles St-Arnaud and Strategist Martin Whetton have focused upon recent Australian economic data explaining that "the Australian Trade Balance deteriorated to a deficit of $556bln from $227bln in June.
They continue to explain that "the report also shows that, on a non-seasonally adjusted basis, iron ore exports increased by 1% m-o-m from higher volume, with exports to China increasing by 4% m-o-m. On the flip side, coal exports declined by 7% m-o-m, mostly due to a decline in both the volume and price of coal to China. Note that iron ore and coal represent about 40% of total exports."
They conclude that the report suggest that net exports are likely to be a drag on Q3 growth. However, the note that "despite the decline in iron ore prices, continued increases in exports volumes, especially to China, means that this sector likely contributed positively to growth in July. This suggests that, despite the high inventory of iron ore, Chinese demand continued to increase in July and this may have also been the case in August. However, lower prices could mean that the value of exports of iron ore may have declined and imply a negative terms-of-trade shock."
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