Preview of the Q2 current account and net exports data from Australia due at 0130GMT

BoP Current Account for Q2

  • expected AUD -7.5bn, prior AUD -3.1bn

Net exports as a % of GDP,

  • expected 0.0, prior -0.70

Previews - any bolding is mine ...

ANZ:

Current Account

  • We expect that the current account deficit will widen to AUD7.8bn in Q2 (1.8% of GDP) from a deficit of AUD5.0bn (1.1% of GDP) in Q1.
  • This largely reflects a smaller trade surplus which the ABS reports shrunk to AUD3.3bn in Q2 from AUD7.3bn in Q1.
  • We expect the net income deficit to have been broadly steady as a percentage of GDP.

Net exports

  • We expect that the current account deficit will widen to AUD7.8bn in Q2 (1.8% of GDP) from a deficit of AUD5.0bn (1.1% of GDP) in Q1.
  • This largely reflects a smaller trade surplus which the ABS reports shrunk to AUD3.3bn in Q2 from AUD7.3bn in Q1.
  • We expect the net income deficit to have been broadly steady as a percentage of GDP.

National Australia Bank:

  • Tuesday's Balance of Payments for the June quarter is expected to reveal a net zero contribution to growth.
  • The release will likely reveal a larger current account deficit in Q2, partly reflecting the interruption to coal rail infrastructure constraining Queensland coal exports for several weeks, since rectified.
  • Also be aware that just as Engineering Construction was bloated in the June quarter by the Ichthys LNG Central Process Facility sailing into Australian waters in May, this may also be included in the Balance of Payment report.
  • There would be a net zero impact on GDP, with any import offset on the investment side of the accounts.

Westpac:

Australia's current account deficit narrowed to only $3.3bn in Q1, 0.7% of GDP. That was the smallest deficit as a share of the economy since the end of 1979. The trade surplus was 2.1% of GDP, the largest since mid-1973.

  • In Q2, the current account widened to a forecast $9.0bn as the trade position deteriorated on a dip in export prices as commodity prices eased.
  • The trade balance was $3.3bn in Q2, a $5.9bn deterioration on Q1 (or, after revisions, a deterioration of $4.0bn). Export earnings declined by around 3%, dented by lower prices, while the import bill increased by around 2%. The terms of trade declined by an estimated 5%.
  • The net income deficit is expected to hold around the Q1 level of $12.35bn, which represented a $5bn deterioration on six months earlier, as foreign investors in the mining sector enjoyed stronger returns.

Net exports, like inventories, were a swing factor over the first half of 2017 - but moving in the opposite direction.

  • In Q1, net exports subtracted a hefty 0.7ppts from growth as exports fell by 1.6% and imports increased by 1.6%, to meet rising demand. The key surprise was that resource exports slumped 4.6%, subtracting 2.5ppts of total exports, hit by bad weather and mechanical disruptions.
  • In Q2, net exports are expected to be broadly neutral, at +0.1ppt. Export volumes rose an estimated 2.2%, with gains in iron ore, LNG, services and manufacturing outweighing a fall in coal. Coal shipments are set to rebound in Q3 with a return to more normal conditions. Import volumes advanced a further 1.9% we estimate, with broad based strength (excluding gold).

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For the Australian dollar, watch the 'net exports' - a miss here will compound the disappointment of yesterday's GDP input data (Australia data - Q2 Inventories: -0.4% q/q (expected 0.3%)) and should be a negative input for the AUD.

In-line, or a beat, though, should be neutral to perhaps even a small positive inout for currency.