From Westpac:
Q3 net exports: 1.5ppts
Net exports will add 1.5ppts to Q3 GDP.
This exceeded expectations (mkt median 1.2ppts, Westpac 1.3ppts).
Export volumes rebounded by 4.6%, to be 6.5% above a year ago (Westpac 4.4%qtr).
Import volumes contracted by 2.4% (Westpac -2.0%qtr).
The terms of trade declined by 2.3% to be 10.4% lower than a year ago, as global commodity prices tumbled.
Export volumes are advancing as the mining boom pays dividends and as service exports, +0.9%qtr, 3.9%yr, respond to the lower AUD.
On the import side, services are particularly weak, -5.2%qtr, -8.1%yr, as the lower AUD sees Australians redirect spending from overseas travel to domestic holidays.
Q3 public demand, -1.1%
In Q3, public demand was very weak, -1.1%, centred on a sharp drop in investment (Westpac -0.3%).
Implications for Q3 GDP
We have revised up our forecast for Q3 GDP to 0.9%qtr, 2.3%yr, from 0.7%qtr.
This takes on board the upside surprises from inventories and incomes, included in the Business Indicators survey.
Net exports and public demand provided offsetting surprises.
Net exports are the key growth driver in the quarter, +1.5ppts, centred on a lift in exports of both resources and services.
Domestic demand is forecast to contract by 0.7% in the quarter, centred on a 5% drop in business investment and a 9% fall in public investment, subtracting 0.75ppts and 0.4ppts off demand.
Consumption is forecast to grow by a modest 0.5% and home building activity is up 1%.
Inventories are neutral and the statistical discrepancy adds 0.1ppt (reflecting the apparent strength in incomes, despite the fall in the terms of trade).
