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GDP June Quarter 2014: Annual GDP Growth of 3.1%, Quarterly 0.5%; ABS 5206.0 - Australian National Accounts: National Income, Expenditure and Product, June 2014
Topic Started: 3 Sep 2014, 12:52 PM (912 Views)
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ABS Data: http://www.abs.gov.au/ausstats/abs@.nsf/mf/5206.0

GDP growth rates, Volume measures, quarterly change
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Contributions to GDP growth, Seasonally adjusted
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JUNE KEY POINTS

KEY AGGREGATES

In trend terms, GDP increased 0.7% in the June quarter 2014. Gross value added per hour worked in the market sector rose 0.9% and the Terms of trade fell 1.6%.
In seasonally adjusted terms, GDP increased by 0.5% in the June quarter. The Terms of trade decreased 4.1%, and Real gross domestic income decreased 0.3%.

EXPENDITURE ON GDP

In seasonally adjusted terms, the contributors to the increase in expenditure on GDP were Changes in inventories (0.9 percentage points), Final consumption expenditure (0.3 percentage points) and Private gross fixed capital formation (0.3 percentage points). The main detractors were Net exports (-0.9 percentage points) and Public gross fixed capital formation (-0.2 percentage points).

INDUSTRY GROSS VALUE ADDED

In seasonally adjusted terms, the main contributors to GDP growth were Manufacturing (up 2.1%), Construction (up 1.4%) and Accommodation and food services (up 4.5%) each contributing 0.1 percentage points to the increase in GDP. The main detractor was Mining (down 1.4%) detracting 0.2 percentage points from growth in GDP.
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Lef-tee
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I'll wait for more in-depth analysis but it looks like more of the same really - not devastating but pretty lacklustre. Thank God for inventories because it would be lousy without that.
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stinkbug
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Lef-tee
3 Sep 2014, 01:11 PM
I'll wait for more in-depth analysis but it looks like more of the same really - not devastating but pretty lacklustre.
Yep. And I expect we will several years of this level of performance yet.
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Ollie
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The ABS national accounts data for the June quarter registered a 0.5% increase in real GDP over the quarter and a 3.1% rise over the year. The result beat market expectations for 0.4% growth over the quarter and 3.0% growth over the year.

On a per capita basis, however, real GDP increased by only 0.1% and by 1.5% over the year. Further, real national disposable income per capital fell by 0.6% over the quarter and by 0.5% over the year.

According to the ABS, seasonally adjusted growth for the quarter was driven by:

a 0.9% change in inventories;
a 0.3% contribution from final consumption expenditure;
a 0.3% contribution from Private gross fixed capital formation; partly offset by
a 0.9% detraction from Net Exports; and
a 0.2% detraction from Public gross fixed capital formation.

The main contributors to GDP growth were Manufacturing (up 2.1%), Construction (up 1.4%) and Accommodation and food services (up 4.5%) each contributing 0.1 percentage points to the increase in GDP. The main detractor was Mining (down 1.4%) detracting 0.2 percentage points from growth in GDP.

Results were mixed at the state and territory level, with final demand growing in Victoria (+1.2%), Queensland (+0.4%), South Australia (+1.4%), Northern Territory (+1.9%), and the ACT (+0.3%), but falling in New South Wales (-0.4%) and Western Australia (-0.5%), and flat in Tasmania. Final demand nationally was also quite soft, coming in at just 0.4%.[Note: state final demand does not include exports, so is markedly different to GDP].

The terms-of-trade fell by a seasonally-adjusted 4.1% over the quarter and by 7.9% over the year.

And as expected, the falling terms-of-trade dragged-down income growth, with real per capital national disposable income (NDI) falling by 0.6% over the quarter and by 0.5% over the year.

Given the ongoing large falls in commodity prices (particularly iron ore) since the June quarter, income growth is likely to slump further over the September and December quarters, particularly as contract prices are adjusted downwards, and will continue to be weak as long as the terms-of-trade unwinds from its current very high level.

The fall in national disposable income helped drag-down nominal GDP, which is generally a negative indicator for government finances.

Real GDP per hour worked also rose by 1.0% over the June quarter and was up 2.0% over the year, suggesting improved labour productivity as the structural adjustment under way continues to create greater efficiencies in the weaker sectors.

Finally, the household savings ratio rose marginally over the quarter to 9.4% from 9.2%, but continues to trend lower.

Overall, the result came in as expected with GDP growth slowing and national income taking a hammering as weaker commodity prices (particularly iron ore) drags down the terms-of-trade.

The outlook is not too bright either, with ongoing sharp falls in commodity prices (particularly iron ore) likely to continue dragging down per capita NDI in the September and December quarters – a trend that is likely to continue as the terms-of-trade retraces back towards its long-run average.

The falling away in nominal growth is a bad sign for Budget revenues as well, it is already well below forecast and likely to remain so as the terms of trade fall.

Moreover, the upcoming expected falls in mining capital expenditures will provide headwinds to growth over coming years, which will likely keep headline GDP below its longer-term trend, and ultimately at an insufficient level to prevent unemployment from rising, despite rising net exports as increasing mining capacity comes online.
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Perthite
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So final demand down in WA.

Exports basically useless when TOT are getting smashed the way they are.

A big hole.
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Economic growth slows to 0.5 per cent in June quarter

September 3, 2014 - 12:22PM
Mark Mulligan

The Australian economy grew a mere 0.5 per cent in the June quarter as a steep fall in export values and weak capital expenditure crimped national output.

The quarterly gross domestic figure, which was slightly above the Reserve Bank of Australia's own calculations, takes the annual growth rate to the end of June to 3.1 per cent compared with 3.5 per cent at the end of March. It compares with surprisingly robust 1.1 per cent expansion in the March quarter, reflecting a benign cyclone season and the lift this gave to export volumes.

GDP measures the real value, after inflation, of the goods and services produced within a country.

Of particular importance to Australia, which relies heavily on exports, is the difference in value between the products it ships to other countries and the cost of imports.

GDP also reflects both private and public sector investment in new infrastructure and capital equipment such as machinery.

Private sector estimates of the June quarterly figure have fluctuated between 0 and 0.6 per cent in recent days on a deluge of economic data, only some of which fed into GDP.

After an initial spike on the better-than-forecast top-line number, the Australia dollar returned to its earlier levels around US92.75 cents.

In releasing the national accounts, the Australian Bureau of Statistics said: "Private gross fixed capital formation and final consumption expenditure contributed 0.3 percentage points each to GDP growth.

"Changes in inventories contributed 0.9 percentage points to GDP growth. This was offset by a negative 0.9 percentage point contribution to growth from net exports."

Inventories, which reflect the value of stock held by companies when the national accounts are calculated, is the least-predictable of GDP elements. Economists have warned that the strong build-up in the June quarter could detract from September-quarter figures.

Read more: http://www.smh.com.au/business/the-economy/economic-growth-slows-to-05-per-cent-in-june-quarter-20140903-10bp5n.html
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Ollie
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An examination of the national accounts data shows that while real per capita national disposable income (NDI) initially grew strongly after the GFC, it has more recently fallen back to earth and has now grown at a weaker pace than at the same time after the early-1990s recession.

The story for households is even worse. While RBA data for the June quarter has not yet been released (and will likely show further deterioration), growth in real per capita household income has averaged just 0.8% per annum between March 2010 and March 2014, which is slower than the 1960s (2.3%), 1970s (1.9%), 1980s (1.0%), 1990s (1.3%), and 2000s (3.2%).

The reason for the strong recovery and more recent decline in real NDI per capita is the sharp rise and then fall in the terms-of-trade, which rose by 39% in the two years to September 2011, but has since fallen by 20%.

As commodity prices and the terms-of-trade continue to retrace back towards their longer-run average, it will drag on NDI, meaning that Australia is likely to continue experiencing historically weak income growth.

It’s important to also note that per capita growth in GDP, although better (due to rising export volumes) has also been lacklustre. As shown by the next chart, which measures real GDP per capita using the ABS’ trend measure, it took 9 quarters following the GFC before GDP per capita recovered to its June 2008 level. And 24 quarters later (June 2014), GDP per capita is only 5.0% above the level in June 2008.

While the 2008 slowdown (recession in terms of real GDP per capita) was not as severe as the previous three episodes, the recovery has easily been the weakest of the four episodes. The trends also look likely to widen the gaps further as the once-in-a-century mining investment boom unwinds over coming years, offset only partly by rising export volumes.

As I keep saying, we have a “lost decade” in the making for Australia.
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