We now have all of the partial indicators we will get to now-cast 1Q real GDP. Growth looks like it was quite strong in 1Q at around 0.9%. This would take year-ended growth higher to 2.8% from 2.3%. That said, growth remains at or slightly below estimates of potential, implying that the degree of spare capacity in the economy has not been eroded. Also, we have concerns about the skewed composition of growth. In 1Q, most of the growth came from an uplift in net exports, inventory build and government spending. Private domestic demand did not contribute much, with consumers and businesses struggling to make much of a difference.
It is also worth noting that growth of around 0.9% is slightly underwhelming considering that at one stage, it looked as though net exports would make a much bigger contribution to growth, and some now-casts on the street were being revised up above 1%.
Policy implications
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David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
