The latest report card on the health of the Australian economy will arrive later this morning with the release of Q1 GDP.
After a barnstorming end to 2016, growth is expected to decelerate sharply in the first three months of 2017. Some even expect the economy to contract, marking the second time in the past three quarters that negative growth has been reported.
If that eventuates it will only add to chatter that Australia may fall into recession, something that hasn’t been seen since mid-1991.
However, if an increase is recorded, Australia’s run of uninterrupted economic growth will stretch to 103 quarters, equalling the record held by the Netherlands for a developed nation not experiencing an economic downturn.
One way or another, there’s sure to be a talking point today.
Here’s the state of play.
- In the December quarter last year, real GDP grew by 1.1%, seeing the year-on-year rate accelerate to 2.4%.
- It was the equal-fastest quarterly increase since the September quarter of 2011.
- The rebound followed a 0.5% contraction in the September quarter that was the largest since the GFC.
- Nominal GDP — taking into account both volumes and price movements — jumped by a larger 3.0% during the quarter, leaving the increase on a year earlier at 6.1%, the fastest increase since the September quarter 2011.
- Household final consumption expenditure — the largest component within GDP — contributed a massive 0.5 percentage points to growth, thanks in part to the household savings ratio tumbling to 5.2%, the lowest level since the September quarter of 2008.
- Net exports, public demand and dwelling investment also made positive contributions to real quarterly growth, helping to offset a small decline in inventories.
- Today, however, many of those growth drivers are likely to be far less significant, or will actually detract from growth, in the March quarter.
- Real GDP is tipped to grow 0.3% for the quarter, seeing the year-on-year rate drop to just 1.6%, the lowest level since the September quarter of 2009.
- Some, such as Morgan Stanley, the National Australia Bank and Capital Economics, are forecasting that GDP will contract during the quarter.
- Of what we know so far, inventories are likely to make a hefty 0.4 percentage point contribution to growth, while business investment and public demand are expected to boost GDP marginally.
- Offsetting those positive contributions, dwelling investment and net exports will drag significantly.
- Household consumption — the largest component of GDP at around 60% — won’t be known until the report is released.
- We already know that retail sales volumes — accounting for around a third of household consumption — grew by paltry 0.1% over the quarter.
- Nominal GDP is expected to grow significantly faster than real GDP, courtesy of another boost to Australia’s terms of trade on the back of higher commodity prices.
The GDP report will arrive at 11.30am AEDT.
Business Insider will have full coverage as soon as data hits the screens.