Wider trade gap adds to economy’s worries

From Jens Meyer and Patrick Commins:

A surprise blow-out in the October trade deficit has raised questions about the predicted rebound in economic growth, following the first contraction in GDP in five years.

Instead of shrinking as predicted, Australia’s trade gap widened 20 per cent to $1.54 billion as growth in imports outpaced exports….

Paul Dales from Capital Economics said the October trade number was worrying as it implied net exports – a key GDP component – might be a big drag on economic growth in the fourth quarter, as volumes mattered for real GDP growth.

“This could all change when the November and December trade data are released. But at the moment, other parts of the economy will have to be much stronger to prevent another fall in GDP,” he said, adding that while that was probable, he was nonetheless now more worried about a possible recession.

On its own, the trade deficit is unlikely to tilt the economy into recession but there is a worrying contraction in business investment, outside of the expected mining slow-down, and in wages growth.

Source: Wider trade gap adds to economy’s worries