More GDP inputs, this time better:
- net exports to add 0.4%
- public consumption and investment to add 0.3%
So, at this stage it looks like:
- private investment weak (probably negative);
- public investment 0.3%;
- household consumption (perhaps weak based on retail volumes and imports);
- net exports 0.4%, and
- inventories -0.3%.
Consumption the key. As always, GDP is a craps shoot. WBC now sees risk evenly balanced:
Implications for Q3 GDP forecast
We have rounded down our forecast for Q3 GDP growth from 0.7%qtr to 0.6%qtr – with risks evenly balance.
Annual growth is a forecast 3.3%, little changed from the 3.4% outcome in Q2.
The arithmetic of our Q3 GDP forecast is: domestic demand 0.5%; inventories -0.3ppts; and net exports +0.3ppts.
As confirmed in the data today, government spending and net exports are key growth drivers in the quarter. Government spending is running at a brisk pace and has considerable further upside as governments continue to commit to additional investment projects, particular transport infrastructure.
Key uncertainties: the consumer and the drought – with a lack of partials around consumer spending on services and on farm inventories. The drought in NSW and surrounding areas is likely to have its biggest impact in Q4 and Q1 – but there is a risk of an inventory drag in Q3.