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JUNE KEY POINTS

KEY AGGREGATES

In trend terms, GDP increased 0.5% in the June 2013 quarter. Gross value added per hour worked in the market sector increased 0.5% and the Terms of trade rose 1.1%.
In seasonally adjusted terms, GDP increased by 0.6% in the June quarter. The Terms of trade rose 0.1%, and Real gross domestic income rose 0.6%.

EXPENDITURE ON GDP

In seasonally adjusted terms, the contributors to expenditure on GDP were Final consumption expenditure (0.4 percentage points), Private gross fixed capital formation (1.4 percentage points) and Changes in inventories (0.2 percentage points). The main detractor was Public gross fixed capital formation (-1.4 percentage points).

INDUSTRY GROSS VALUE ADDED

In seasonally adjusted terms, the main contributors to GDP were Financial and insurance services (up 2.1%) and Construction (up 1.9%). Financial and insurance services contributed 0.2 percentage points to the increase in GDP while Construction contributed 0.1 percentage points.

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Australia's economic growth better than forecast

4 September 2013

Australia has reported better-then-forecast growth numbers for the April to June quarter, boosted by gains in consumer spending.

Its gross domestic product (GDP) expanded 2.6% during the quarter, from a year earlier. Compared with the previous quarter, growth was 0.6%.

Most forecasts were for an annual growth closer to 2.5%.

Analysts said the data was likely to see the Australian central bank hold back on easing its policies further.

"This is probably a touch above what the Reserve Bank of Australia was expecting and this would decrease the probability of a near term rate cut," said Matthew Johnson, an interest rate strategist at UBS.

Australia's central bank, which has lowered borrowing costs to a record low in recent months, kept rates unchanged as it met on Tuesday.

Australia's economy, which enjoyed robust growth in recent years, has seen its growth rate slow of late.

One of the biggest drags has been the slowing demand for its natural resources such as iron ore.

The sector has been hurt by a decline in demand from countries such as China, triggering concerns that Australia's economic growth may dip further.

At the same time, other sectors of the economy have not picked up enough speed to offset the slowdown in mining.

Analysts said that while the latest numbers had helped allay some fears of a sharp slowdown, the economy was still under pressure.

Brian Redican, a senior economist at Macquarie Bank, said the latest numbers were a continuation of "this distinctly sub-trend growth that we've seen over the last nine months now".

"It doesn't suggest that the economy is falling into a hole yet, but there aren't really signs that we're going to break out of this rut either."

Read more: http://www.bbc.co.uk/news/business-23941461

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Sluggish economy 'stuck in third gear'

September 4, 2013 - 12:44PM
Gareth Hutchens

Australia’s economy continues to expand at a sluggish pace, with the annual growth rate hitting 2.6 per cent.

Bureau of Statistics figures show the economy grew by just 0.6 per cent, seasonally adjusted, in the three months to June. That was slightly above analyst expectations of 0.5 per cent growth and follows growth of 0.6 per cent from January to March this year.

The biggest contributors to economic growth for the last 12 months were the mining industry, financial and insurance services, and health care and social assistance.

But manufacturing, as well as the businesses operating major utility services - electricity, gas, water and waste services – all detracted slightly from national growth.

The household saving rate also continues to remain high. Economists were expecting a saving ratio of 10.7 per cent in the June quarter, but it increased slightly to 10.8 per cent.

That is one of the major reasons why retail sales figures were so weak in July, growing by just 0.1 per cent, with the big department stores registering an 8 per cent fall in sales.

Today's data is the final piece of the statistical puzzle that allows economists to summarise the last 12 months of economic activity, and to make their projections for future economic growth.

The GDP figure confirms that the economy has been growing at a “below trend” pace for the past year (trend growth is 3 per cent).

It is the main reason why the unemployment rate has crept up from 5.1 to 5.7 per cent in the past 12 months.

Signs of life in housing

The GDP figure is backward looking - it provides a snapshot of economic activity that has already taken place.

But forward looking indicators provide an idea of the type of activity we can expect to see in the coming year.

And an important indicator of future economic activity is the number of building approvals. That’s because it shows how many dwellings people are ready or planning to build.

Economists say the housing sector is one of the only non-mining parts of the economy that is showing any signs of life.

The most recent building approval figures, from July, jumped 10.8 per cent to be over 170,000, which has not happened all that often since the stimulus-driven boom in 2009. That followed another strong figure in April.

“I think there is increasing evidence that the housing sector is stirring,” Mr Eslake said.

But business confidence, which in some cases is a leading indicator, is very poor.

The Reserve Bank governor Glenn Stevens said yesterday that the dollar had dropped 15 per cent in value since early April, and this was a good thing.

More hours worked

GDP per hour worked rose 0.2 per cent in the June quarter (in trend terms), and 1.7 per cent through the year.

Hours worked also rose, by 0.3 per cent in the June quarter and 0.8 per cent over the year.

Estimates of GDP per hour worked are commonly interpreted as changes in labour productivity.

However, as the Bureau of Statistics points out, it should be noted that these measures reflect not only the contribution of labour to changes in production per hour worked, but also the contribution of capital and other factors, such as managerial efficiency, and economies of scale.

Household spending slow

Household spending climbed 0.4 per cent in the second quarter, adding 0.2 percentage point to GDP growth, while non-dwelling construction jumped 14.9 per cent last quarter, adding 1.3 points to the expansion.

Read more: http://www.smh.com.au/business/the-economy/sluggish-economy-stuck-in-third-gear-20130904-2t4g4.html

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Economy grows but way below its potential

September 4, 2013 - 4:01PM
Tim Colebatch

Wednesday's national accounts tell us what we already knew. The economy continues to grow, but slowly. The good news is that the pace of growth is not slowing. The bad news is that it is not accelerating either.

In the six months to June, the Bureau of Statistics estimates that our GDP grew at an annualised pace of 2.25 per cent. That might be welcome in Japan, where the population is now shrinking, but Australia's population at last count was growing by 1.75 per cent.

The real bottom line of economic performance is not GDP, but GDP per head. The economy is growing, but that growth is too weak to stop unemployment rising, as firms fight for survival by economising wherever they can.

In the past year, on the trend figures, hours worked in the market sector grew just 0.2 per cent. Wages grew just 2.7 per cent, and profits outside the finance sector grew just 0.8 per cent.

Firms are keeping their heads above water, with some welcome results. Labour productivity in the market sector grew 2.3 per cent, on top of a 2.8 per cent growth the year before. Real unit labour costs declined by 1 per cent, and are now 4 per cent below their pre-GFC peak.

It is a similar story at home. Household spending rose just 2 per cent in the past year. Household saving grew 10 per cent. These are bad times for shops, restaurants and anyone trying to sell us things we don't actually need. But we are seeing households paying down mortgages and storing money in the banks, and that is the sensible thing to do in uncertain times.

These figures won't change what anyone thinks about the economy. At first sight, they don't tell us anything new that is likely to reverberate in the final days of the election campaign.

But they will warn the Reserve Bank that the "green shoots" of recovery it sees are still tiny. While the Reserve officially no longer leans towards another rate cut, this data sends a clear message that another cut must be on the books unless the dollar keeps falling and we see a clear pick-up in the figures for employment, housing and retailing in coming months.

Why? A look at where we are growing helps explain it.

Only a quarter of that growth came from domestic spending. The Bureau estimates that investment peaked late in 2012, and has declined 2.3 per cent in the past six months as the mining boom begins to fade. The main engine driving our growth is now exports, which swelled by 6.4 per cent over the year, while imports declined 1.8 per cent.

By industry, the growth in output was dominated by two industries: mining and finance. Almost a third of the growth over the past year has been in mining, where output grew 8.1 per cent as more mines have passed from construction into production. Another 30 per cent of the growth was in finance and insurance, which grew 7.2 per cent as we saved more and more for it to invest for us.

The health sector is immune from bad economic times, growing 5.5 per cent – and despite all the staff cuts at Federal and state level , the Bureau estimates the output of public administration and safety (including private security firms) grew 5 per cent. You wonder how they measure that.

Other industries with many employees were not doing well. Manufacturing output inched up 0.6 per cent, but remains 10 per cent below its pre-GFC peak. (You sometimes see ignorant commentators say this is normal for manufacturing. No, it isn't; tell them to look at the data.)

Hotels and restaurants went backwards by 1.8 per cent. It's been a particularly hard fall in Melbourne, where 1600 cafes and restaurants have reportedly closed their doors. The Bureau reports that restaurant activity in Victoria has dropped 5 per cent in the past year.

Road transport activity, like manufacturing, is still 10 per cent below its pre-GFC level. Even air travel declined last year by 2.4 per cent, as we cut back on discretionary spending. The volume of retail activity did grew 2.3 per cent, but a lot of that was on the back on discounting that meant stores sold more goods, but made less from them.

By state, the baton of growth has passed from Western Australia to the rugby states. The only states where total spending grew faster than the population over the past year were Queensland (up 2.5 per cent) and New South Wales (up 1.6 per cent).

Read more: http://www.smh.com.au/business/economy-grows-but-way-below-its-potential-20130904-2t4zq.html

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It's not much to write home about

September 5, 2013
Malcolm Maiden

Australia has been a mighty little economy for years, but there are warning signs in the June quarter national economic numbers.

First, some bouquets. Gross domestic product (GDP) in the year to June got to $1.5 trillion for the first time. It has grown by $590.2 billion or 64 per cent since 2004-2005, and by 28.5 per cent since 2007-2008, the year of Labor's election win. It has also expanded by 7.6 per cent in the past two years, including a 2.6 per cent rise in the year to June ruled off by Wednesday's national accounts.

The nation is more productive. GDP per hour worked rose by 1.8 per cent in the year to June, although only by 0.3 per cent in the June half. It has risen in seven of the past eight years (2010-2011 was the exception) for a total gain of 8.6 per cent. Real unit labour costs have declined by 3.25 per cent over the same period.

Exxon Mobile has the record for the world's biggest profit, $US45.2 billion in 2008. Australia's GDP ''profit'' in the year to June was 30 times larger.

There are, however, continuing signs in the latest accounts of the weakness that the Reserve Bank has been grappling with, and the Coalition will probably be dealing with after Saturday's election.

Real net national disposable income is GDP recalculated to take into account movements in the terms of trade, offshore payments including interest on overseas borrowings, and offshore receipts including dividends. It is about as close as you can get to a net profit in the national accounts, and it is losing its mojo.

The longer-term numbers still look good, although not as good as GDP. Net national disposable income was $933 billion in 2004-2005, $974 billion in 2006-2007, $1026 billion in 2007-2008 and $1187 billion in 2012-2013. Growth since 2004-2005 has been 27.2 per cent, and since Labor's election in 2007-2008 it has been 15.7 per cent.

They are OECD league-table-topping numbers, but as the resources investment boom that helped propel Australia through the global crisis tails off, net national income growth is slowing. It was only 5 per cent in the past two years, 0.7 per cent in the latest year to June, and just 0.4 per cent in the June quarter.

Read more: http://www.smh.com.au/business/its-not-much-to-write-home-about-20130904-2t5ig.html

Perthite

4 Sep 2013, 06:40 PM

Mining construction still added to the overall number. I would say that is the last quarter for a long time that this will be the case.

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ecorded private aggregate investment rose 5.9%/6.1%, but this was more than accounted for by the national accounts book entry for the purchase by a private sector consortium of the 99-year leases for New South Wales’s Port Botany and Port Kembla in April. Take that out and private business investment declined by 1.2%/-1.3%

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The detail of today’s result shows that private sector spending – household consumption, dwelling investment and business investment excluding asset purchases from/ sales to the public sector – grew only just, by 0.1% in Q2, up just 1.4% these past four quarters.

Lef-tee

4 Sep 2013, 10:10 PM

Seems to be a bit of a weak result. From the NAB economics team...




Looks like another example of GDP being a poor match for what is happening in the real economy.

Pig Iron

4 Sep 2013, 10:06 PM

so much for all your claims the sector is in crsis.