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Trade deficit shrinks in July

AAP logoAAP 8/09/2016

Australia's trade deficit has narrowed more than expected, but the figures aren't as positive as they appear.

The deficit fell to $2.4 billion in July, from $3.2 billion in June, according the Australian Bureau of Statistics.

Economists had expected a deficit of $2.7 billion, but a three per cent jump in exports and flat imports made the result a positive surprise.

While the figures appear positive, they were almost entirely driven by a surge in gold exports, a typically volatile component.

The ABS said non-monetary gold exports increased by 62 per cent to $912 million in July, reversing a 15 per cent fall in June.

JP Morgan economist Tom Kennedy said the mix of the trade data was not as favourable from an economic growth point of view as the headline suggested.

"All of the improvement in nominal export growth owes to non-monetary gold," Mr Kennedy said.

"This category tends to be volatile and payback is likely within months."

He said remainder of export data was disappointing with metal ore shipment values sliding five per cent in the month, offsetting a rise in liquefied natural gas shipments.

Westpac senior economist Andrew Hanlan said the fall in metal ore exports was surprising given that spot prices actually rose in July.

Meanwhile overall imports were flat, falling just $122 million to $28.8 billion.

Mr Hanlan noted consumer goods imports fell by $510 million, largely unwinding a $590 million jump in June, as anticipated.

"However, much of the weakness in consumer goods was offset by broad based strength across the other categories," he said.

Mr Hanlan said the categories showing strength included intermediate goods used in manufacturing processes and fuel, which increased $300 million notwithstanding weaker energy prices.

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