Australia’s September quarter GDP report will be released later today.
While a lagging economic indicator, revealing what happened in the past, it still has significant implications for unemployment, inflation, investment, household incomes and government tax receipts in the future.
After a rollicking first half of the year, growth is tipped to have moderated in the three months to September, partially reflecting an expectation that household consumption, the largest part of the economy, is unlikely to repeat the surge seen in the June quarter.
We already know that retail sales were soft last quarter, but we won’t know whether that was replicated in spending on services — a far larger component of household consumption — until the GDP report is released.
At a time when many are concerned about a negative wealth effect from falling home prices weighing on household spending, and with the RBA continuing to describe household consumption as “one continuing source of uncertainty”, that figure, along with readings on household savings and employee compensation that will feed into expectations for spending in the future, will likely attract plenty of attention today.
Here’s the state of play.
- In the June quarter, real GDP grew by 0.9% in seasonally adjusted chain volume terms, leaving the increase on a year earlier at 3.4%. The year-ended rate was the fastest since the September quarter of 2012.
- Quarterly growth was fuelled by strong household and government consumption, along with small contributions from dwelling investment and net exports, helping to offset a decline in non-residential construction.
- Growth in the March quarter, previously reported at 1%, was revised up to show an increase of 1.1%, contributing to the strength seen in the year-on-year rate.
- Combined, GDP growth in the first half of the year topped 4% in annualised terms.
- Real GDP per capita grew by 0.5% over the quarter, and by 1.8% over the year, reflecting the impact of population growth on the headline GDP figure.
- Nominal GDP — including both volumes and price movements seen during the quarter — grew slightly faster than the increase in real GDP, lifting by 1%. Over the year, growth accelerated to 5.5%, the fastest increase since the September quarter 2017.
- Today, economists expect real GDP growth to have slowed in the September quarter.
- The median forecast looks for a quarterly increase of 0.6%, seeing growth over the year slow to 3.3% without any revisions to prior data. There often is.
- While a slight moderation, such a result would be consistent with forecasts offered by the RBA. At that level, growth would also be expected to place downward pressure on unemployment, and upward pressure on inflation, as the RBA expects.
- On this occasion, growth is likely to be powered by strong government consumption and investment, a boost from international trade and a moderate, and slower increase, in household consumption. Inventories are expected to be the one major drag on growth during the quarter, along with a small decline in dwelling construction.
- Helped by modest growth in employee wages, business profits and firmer commodity prices, nominal GDP is expected to grow substantially faster than real GDP over both the quarter and year.
- Nominal GDP is the broadest measure of income in the economy, and therefore has implications for government tax revenues.
- For those interested in productivity growth, keep an eye on real GDP measured in per capita and hours worked terms.
- Changes in per capita real net national disposable income will also be of interest. It’s deemed to be the best indicator of national living standards within the GDP report.
- Given uncertainty about whether the housing downturn will lead to households spending less and saving more, the household savings ratio — measuring the proportion of disposable income being saved — will also garner plenty of attention.
- It currently sits at the lowest level since before the GFC, reflecting that households have been saving less in order to sustain spending levels in an era of weak income growth.
- Linked to the household savings ratio and household consumption, shifts in compensation of employees will also be watched closely.
The GDP report will be released at 11.30am AEDT.
Business Insider will have all the details once it hits the screens.
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