Q3 GDP below expectations - Australia's economic growth falling short
Q3 GDP below expectations - Australia's economic growth falling short; ABS 5206.0 - Australian National Accounts: National Income, Expenditure and Product, Sep 2013
Tweet Topic Started: 4 Dec 2013, 10:55 PM (827 Views)
GDP growth rates, Volume measures, quarterly change
Contributions to GDP growth, Seasonally adjusted
Quote:
SEPTEMBER KEY POINTS
KEY AGGREGATES
In trend terms, GDP increased 0.6% in the September 2013 quarter. Gross value added per hour worked in the market sector increased 0.2% and the Terms of trade fell -0.9%. In seasonally adjusted terms, GDP increased by 0.6% in the September quarter. The Terms of trade fell -3.3%, and Real gross domestic income fell -0.1%.
EXPENDITURE ON GDP
In seasonally adjusted terms, the contributors to expenditure on GDP were Public gross fixed capital formation (1.3 percentage points), Net Exports (0.7 percentage points) and Final consumption expenditure (0.4 percentage points). The detractors were Private gross fixed capital formation (-1.4 percentage points) and Changes in inventories (-0.5 percentage points).
INDUSTRY GROSS VALUE ADDED
In seasonally adjusted terms, the main contributors to GDP were Mining (up 2.7%) and Construction (up 1.1%). Mining contributed 0.3 percentage points to the increase in GDP while Construction contributed 0.1 percentage points.
The economy has continued to expand at a below-trend pace in the third-quarter of this year, with the annual growth rate at 2.3 per cent.
The economy grew a seasonally adjusted 0.6 per cent in the three months to September, after expanding by a revised 0.7 per cent in the second-quarter, Bureau of Statistics data released this morning showed.
The year-on-year growth rate for the second-quarter was also revised to 2.4 per cent.
The Australian dollar, which was trading at 91.36 US cents before the release, fell to three-month lows. It was buying 90.56 US cents about 1.30pm.
"Today’s numbers are a reminder of the tough trading conditions in the economy, particularly outside of the mining sector," federal Treasurer Joe Hockey said.
The latest GDP figures showed the Australian economy was underperforming, Moody's Analytics associate economist Katrina Ell said.
"We are cautiously optimistic earlier rate cuts will bring growth back to trend at 3 per cent later in 2014," Ms Ell said, adding that monetary policy could take up to a year to flow through to the economy. The last cut to the cash rate was in August.
"There have been tentative improvements in the interest-sensitive sectors like retail and construction that should improve further in coming months."
Economists had consensus forecasts of 0.7 per cent growth for the quarter and 2.6 per cent year-on-year. Growth in the third-quarter was driven by the mining industry, which added 0.3 per cent to GDP.
The construction, transport, postal and warehousing, financial, public administration and healthcare industries also contribute 0.1 per cent each to growth.
The latest growth figures showed households were continuing to save at high levels. The households savings ratio has risen to 11.1 per cent for the third-quarter, up from 10.2 per cent.
The problem with hoping for more is that when you receive the same, it feels like less.
That's pretty much what happened with today's national accounts figures. While a little disappointing, there's nothing in the figures to change the official outlook of both the Treasury and Reserve Bank.
If today's GDP reading of 0.6 per cent growth for the September quarter and 2.3 per cent growth for the year was released a month or so ago, it would have seemed ordinary enough, in both senses of “ordinary”.
But hopes were raised by some recent better-then-expected recent statistics such as profits (gross operating surplus), construction and retail. Thus 0.7 per cent growth for the quarter was tipped with a chance of even more. Silly us.
Turns out the better expectations were outweighed by weaker non-dwelling construction, inventory rundowns in manufacturing and wholesale and a weaker-than-expected contribution from investment in building dwellings – it was no contribution at all despite the many green shoots and a steady rise in building approvals.
It's worth keeping the disappointment in some perspective.
June quarter GDP growth was revised up to 0.7 per cent and the September quarter could well receive a bit of upwards revision down the track as well, such is the nature of these things.
Thus it is possible to say that growth over the past two quarters has been running at an annualised 2.6 per cent – a figure that means more for the outlook than the year-to-September 30 growth of 2.3 per cent. (The December and March quarters are already a rather long time ago.)
While we await Treasury's mid-year-economic and fiscal outlook at the Treasurer's pleasure, the RBA modelling at the start of last month predicted economic growth would hit bottom of about 2.5 per cent in the September quarter and do not much better than that for about 18 months if - and it's an important “if” - our dollar remained at US95 cents.
Well, we're doing the forecast of “about” 2.5 per cent – but the dollar is down 4 cents and all the RBA's jawbones are chewing hard on it in the expectation, or hope, of the US Federal Reserve starting to taper early next year. So the currency is providing some upside already.
Then there's the Great Australian Hope: increased dwelling investment.
The last time Treasury was allowed to speak, it was forecasting 5 per cent growth for this financial year. Today's national accounts showed a private dwellings dip of 0.5 per cent in the September quarter from June and growth of only 1.7 per cent over the year to the end of September.
With prices firming, investors active and approvals rising for 22 consecutive months in trend terms, the RBA guidance is that there is indeed upside in building and renovating our hovels.
That's the promising aspect.
The bad news is that there is no denying the poor state of non-dwelling construction and that mine construction has hit its peak.
The oil and gas industries continue to go gangbusters, but, as confirmed in last week's capex survey, mine construction is topping out and will start falling sharpishly next financial year.
Non-dwelling construction took a big 1.3 points off GDP growth in the September quarter. This is the big hole in the next few years that more forward-thinking infrastructure investment could help fill.
But that's not going to happen any time soon, given the lead times involved in getting shovels into dirt.
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