("Australia Trade Deficit Narrows," at 0035 GMT, misstated the US dollar conversion in the second paragraph. The correct version follows:)

By James Glynn

SYDNEY--Australia's monthly trade deficit narrowed in September with forecasters expecting surging coal prices to deliver further sharp improvement in coming months.

The resource-rich economy posted a seasonally adjusted trade deficit of 1.23 billion Australian dollars (US$941 million) in September, compared with a deficit of A$1.89 billion in August, the Australian Bureau of Statistics said Thursday.

The result was narrower than analysts' expectations of a deficit of A$1.7 billion.

By value, exports rose 2.0%, while imports fell 1.0% in September from August

All eyes are on Australia's coking coal exports, with the price for the energy source skyrocketing by a factor of three over recent months.

Cuts in China's coal supply have sparked the surge in global prices, which if sustained, will deliver a sizeable boost to the Australian economy, economists said.

Question remain about whether the jump in prices will last, but already the improved market conditions are prompting some producers to bet on a sustained gain and reopen mines.

Australia's commodity price index lifted by 8% in October. The index is 14% higher than a year ago in U.S. dollar terms and 8% stronger in Australian dollar terms.

While not as stratospheric as coal, iron ore prices have also strengthened this year. Coal and iron ore combined account for close to half of Australia's export basket.

-Write to James Glynn at james.glynn@wsj.com

(END) Dow Jones Newswires

November 02, 2016 21:42 ET (01:42 GMT)

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