I

ndonesia'€™s international trade unexpectedly recorded a deficit in August, having posted a meager surplus in July, despite the sharp year-on-year increase in exports over the course of the month.

The Central Statistics Agency (BPS) reported on Wednesday that the trade balance suffered a deficit of US$318.1 million in August, contrary to the predictions of analysts who expected international trade to record a surplus.

BPS chairman Suryamin said that the unexpected deficit was due to the $800 million deficit booked by the oil and gas sector, which outweighed positive contributions from non-oil and gas sectors.

'€œThe deficit of the oil and gas sector is too high [for the non-oil and gas sector to overcome],'€ he told reporters during a media briefing in Central Jakarta on Wednesday.

Suryamin reported that the country'€™s total exports rose by 2.4 percent to $14.47 billion in August from $14.12 billion in July. Based on year-on-year calculations, August exports jumped by 10.63 percent, the biggest increase since October 2011, and more than the market consensus of 8.7 percent.

'€œThis is the fourth time this year we'€™ve recorded a deficit in our trade balance. In January we suffered a $450 million deficit, in April the figure spiked to $1.96 billion and in June we recorded a $290 million deficit,'€ he explained.

Imports increased by 13.69 percent to $14.79 billion in August from a year earlier, a 5.05 percent climb on a monthly basis.

The growth in inbound shipments was primarily due to the 14.99 percent hike in non-oil and gas imports to $11.39 billion, while oil and gas imports fell by 18.54 percent to $3.39 billion.

Suryamin said that the sliding oil and gas imports were the result of declining travel activity after the Idul Fitri festival, as well as increasing conversion to alternatives to oil and gas.

The rupiah strengthened 0.5 percent to close at 12.128 per US dollar, the biggest gain since Aug. 11 amid renewed optimism following the sharp increase in exports during August. The currency lost 4 percent last month, its worst performance since November 2013.

Bank Danamon economist Dian Ayu Yustina said that the deficit fell in line with previous estimates of a deficit in the region of $186 million.

'€œOverall exports were positive. Non-oil and gas exports grew slightly by 2.4 percent month-to-month, driven by manufactured goods, machinery and electrical appliances, indicating a demand recovery, particularly from the US and Europe,'€ Dian said in her research note, adding that exports of crude palm oil (CPO) and mineral fuel remained low.

Meanwhile, Barclays economists Wai Ho Leong and Bill Diviney said that the country'€™s trade balance results were weaker than their forecast of a small surplus of $268 million.

They said in their report that the slide back into deficit was caused by a sharp rebound in import growth, which outpaced the improvement of exports. '€œWe note that on a year-to-date basis, the trade balance remains in much better shape than last year at a deficit of $1.4 billion,'€ the economists stated.

Mining exports were also less of a drag than Leong and Diviney expected, despite the recent resumption of copper shipments by Freeport-McMoran following an agreement with the government to establish a smelter.