Q3 Australian GDP preview

From Westpac today:

The Australian National Accounts, to be released on Wednesday 4 December, will provide an estimate of economic activity in Q3. GDP growth is forecast to be 0.7%qtr, edging up from gains of 0.6% in Q2, 0.5% in Q1 and 0.7% in Q4 of 2012. Annual growth is expected to come in at 2.5%.

• Note that the Q3 release will see significant revisions associated with the incorporation of new annual benchmarks. These were released in November and included a downward revision to GDP growth for the full 2012-13 financial year from 2.9%yr to 2.6%yr. It is unclear how these changes will affect the quarterly growth profile but clearly they could be significant.
• Domestic final demand is expected to grow by 0.5% in Q3, driven by a modest pick-up in consumption and what appears to be a temporary bounce in engineering construction. Non-residential investment is also set to provide support, but weaker equipment investment and residential construction will be partial offsets.
• Net exports are expected to add 0.2ppts in the quarter on the back of weak imports. The weakness in imports coupled with the solid gain for consumption points to a slower rate of inventory accrual.
• Labour market conditions have remained subdued in recent months. Employment declined 0.1% in the quarter. Business confidence hit a clear low in Q3 as disappointing demand combined with uncertainty ahead of the Federal Election; the mood likely contributing to the weakness in investment, spending on equipment in particular.
• Housing construction is in an upswing as the sector responds to low interest rates. However, as at the September quarter the upturn was still fragile, with falling renovation activity a significant factor. The segment will likely strengthen in coming months however.
• National income was dented again by another decline in Australia’s terms of trade, down an estimated 1.9% in Q3 following a flat Q2. Company profits appeared to get some support in the quarter from a lower AUD but are expected to be up only slightly overall with wages growth subdued.

Sounds more than fair to me with the usual caveat that GDP is a random walk.