Australia's trade surplus narrowed from a record high of $3.4 billion to $1.9 billion after a 4.5 per slide in exports and a 1.6 per cent jump in imports.
But nearly all of the slide was brought about by what appears to have been a one-off partial shutdown in China's steel industry, with 40 per cent of mills apparently moved off-line for regular maintenance.
ANZ economist Andrew McManus said he believed that one single decision had caused a 77 per cent drop in hard coking coal exports to China...
"We expect a pick-up in coming months as recent figures suggest China's capacity cranked up in August to more normal levels," he said.
In the year to July Australia's trade surplus with China hit a record high of $11.1 billion. Just over a year earlier it had been zero. The trade surplus with India has also ballooned, more than doubling over two years to $14.4 billion.
At the same time trade with the US hit a new record low of 7.7 per cent. Two-way trade with China hit a fresh record high of 20.6 per cent over the year to July.
"Our result in July was below forecasts, but it should not be dismissed, especially given that even a $1.9 billion surplus is our fourth-biggest," said CommSec economist Savanth Sebastian.
Deutsche Bank economist Adam Boyton agreed, saying "that a $1.9 billion trade surplus can be described as softer than market in our view says more about the remarkable turnaround in Australia's trade balance since April than any sign of a weakening position."
"There have only been four broad phases of material trade surpluses since 1990: the Reserve Bank's gold sales in 1997, the Olympics in 2000 and Mining Boom Mark I and now Mining Boom Mark II."
"We are not alarmed by the relatively large monthly falls in exports of the bulk commodities in July, especially when set against the rises seen since April."
Imports were boosted by the one-off delivery of six Super Hornet aircraft to the Department of Defence, pushing so-called "other merchandise exports" up $477 million.
Consumption goods imports fell in July slipping 1.1 per cent after climbing 0.5 per cent in June.
Published in today's SMH and Age
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