From Westpac:
The Australian National Accounts, to be released on Wednesday September 7, will provide an estimate of economic activity for the June quarter.
In the year to March, real GDP grew by 3.1%, a little above trend, which is judged to be 2.75%. Supporting activity are lower interest rates (housing) and a lower dollar (service exports). Mining’s impact is relatively neutral, with falling investment offset by the export expansion.
In the March quarter, GDP increased by a relatively strong 1.1%. The arithmetic was: domestic demand +0.1%, net exports +1.1ppts, inventories 0.0ppts and statistical discrepancy -0.2ppts (i.e. the expenditure measure of GDP outpaced that of income and production).
For Q2, we anticipate real GDP growth of 0.4%qtr, 3.2%yr. The arithmetic is: domestic demand +0.3%, net exports -0.1ppts, inventories 0.0ppts and statistical discrepancy +0.2ppts (reversing the Q1 result).
The loss of momentum in quarterly output is centred on export volatility. Export volumes surged in Q1, +4.4%, as fewer weather disruptions aided a jump in coal and iron ore. In Q2, exports advanced by a more modest 1%, we estimate. That, and a rebound in import volumes, will see net exports swing from adding a weighty 1.1ppts in Q1 to being a small negative in Q2, -0.1ppts.
Domestic demand is expected to eke out a small 0.3% gain in Q2, after an anaemic 0.1% rise in Q1. Public investment adding 0.1ppt after subtracting 0.1ppt in Q1 explains the bulk of this improvement. This represents the resumption of an emerging upswing in public investment. Business investment, centred on mining, will remain a major negative, down 2.7% in Q2, subtracting –0.35ppts.
On the consumer, accounting for 55% of the economy, the national accounts provides us with an update on spending, saving and incomes. We anticipate a more modest rise in consumer spending, +0.6%, following a 0.7% in Q1 and an average 0.85% over the second half of 2015. Notably, the jobs burst of 2015, which boosted household incomes, gave way to a soft spot in the labour market. Indeed, hours worked contracted in the period.
On national income, that has been squeezed of late as the terms of trade fell back to a more sustainable level. Nominal GDP grew by just 2.1% over the past year, well below the 5.6% historic average. However, June represents a break with the recent past. The terms of trade, falling in 16 of the past 18 quarters, increased by an estimated 2% in the period, as commodity prices bounced off their lows. For Q2, we expect nominal GDP to increase by 1%, lifting annual growth to a still weak 2.8%.
The Business Indicators survey, on Monday, will provide some partial information on official estimates of incomes for the quarter, including an update on wage incomes and profits, key inputs into our GDP(I) view.
