Australia runs a small risk of entering technical recession, according to a leading private sector economist, after worse-than-expected October data showed the trade deficit blowing out.

Key points: Deficit rises $269m to $1.54b in October

Deficit rises $269m to $1.54b in October Export prices rises but volumes weak

Export prices rises but volumes weak Economist warns trade could subtract 1ppt from December quarter GDP

The nation's imports exceeded exports by $1.54 billion in October, $269 million worse than the September deficit and widely missing the typical analyst forecast of a $600 million deficit.

The trade deficit blowout was caused by a 2 per cent increase in imports outweighing a 1 per cent rise in exports.

However, the biggest worry identified by Capital Economics analyst Paul Dales in the Bureau of Statistics data is the possible effect of trade weakness on the December quarter gross domestic product, after the shock 0.5 per cent GDP contraction in September revealed yesterday.

"It's too early to have a firm call or a firm forecast but, based on the figures we have for October, it looks as though net exports could subtract up to 1 percentage point from the quarterly rate of GDP growth in the fourth quarter," he told ABC News.

"This means that, in order to avoid a recession - in other words two consecutive quarters of falling output - other parts of the economy would need to be performing much better.

"That's certainly possible, and in fact I would think probable, but these data do suggest that the chances of Australia entering a technical recession have increased."

The risk arises because GDP measures real output - it does not take into account changes in the price of that output.

"The problem is that any increase in export values - so the amount of money exporters are receiving - is probably solely going to be due to this rise in prices, it's not going to be because they're exporting a higher quantity of the products," Mr Dales explained.

"This is crucial, because real GDP measures the volume or the quantity of activity and not the price."

So while rising commodity prices have been cutting Australia's trade deficit over recent months - until October - if the amount of iron ore and coal dug up and shipped out has fallen or stagnated it could drag on GDP.

The economists at investment bank UBS agree that these data raise some very early concerns about the strength of December quarter economic growth.

"The volume of resource exports leaving our shores appears to have continued the third quarter's weakness, falling even more sharply at the start of the fourth quarter (notwithstanding lower volumes support prices)," the bank's analysts argued.

The ABS data for October show hard coking coal export volumes fell 12 per cent, while thermal coal dropped 16 per cent and semi-soft coking coal grew just 1 per cent.

Iron ore and LNG volumes appeared to grow solidly, by around 2-3 and 5 per cent respectively.

Bigger trade deficit leaves much ground to make up

Given that the biggest single drag on economic growth in the September quarter was a 0.5 percentage point reduction to falling public expenditure on infrastructure and equipment, a 1 percentage point drag from net exports will not be easy to make up for.

Retail sales jumped 0.5 per cent in October, which is a positive indicator of reasonable consumption spending that would boost GDP.

However, while acknowledging that it is far too early to make reliable forecasts, Mr Dales said it is increasingly likely that Australia's annual economic growth rate will remain weak, even if the nation does not slip into a technical recession.

"There is going to be a lot of chat about whether Australia is in a recession or not, or is going to have a recession or not, but perhaps the bigger picture is that economic growth is just not as strong as everyone thought."