Australia will receive its latest economic report card this morning with the release of Q2 GDP.
After a less-than-stellar start to the year, economic growth is expected to accelerate sharply following a string of solid GDP inputs received in recent days. Some even think that growth will top 1% for the quarter.
If an increase is recorded, and it looks like it will, Australia’s run without experiencing a technical recession will stretch to 26 years.
Here’s the state of play.
- In the first quarter of the year, real GDP expanded by 0.3%, seeing the year-on-year increase slow to just 1.7%, the weakest level since the September quarter of 2009.
- Household consumption, government spending, non-dwelling construction and business inventories added to growth, offsetting declines in dwelling construction, government investment, business investment and net exports.
- The increase in household consumption was helped by a further reduction in the household savings ratio which dropped to 4.7% from 5.1% in the December quarter.
- Nominal GDP — capturing movements in both volumes and prices during the quarter — grew by 2.3% following a 3.2% surge in the final three months of 2017.
- From a year earlier, it grew by 7.7%, the fastest increase in six years, driven by soaring commodity prices during the quarter.
- Today, the opposite outcome is expected — real GDP is tipped to outperform nominal GDP during the quarter.
- Of the 17 economists polled by Thomson Reuters, the median forecast is looking for an increase in real GDP of 0.9%, seeing the annual rate lift to 1.9%. Individual forecasts for quarterly growth range from 0.5% to 1.2%.
- Household consumption, business investment, government spending and net exports are likely to add to growth, offsetting a decline in business inventories that will detract around 0.6 percentage points from growth.
- Creating some uncertainty about the scale of the quarterly increase, and explaining the divergence in individual forecasts, household consumption expenditure — the largest part of the economy 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 — jumped by a hefty 1.5% during the quarter.
- The unknown is whether that increase was mirrored in, or detracted from, spending on services. The answer to that question will determine the scale of quarterly increase.
- If there is a big increase in household consumption, there’ll be plenty of interest as to whether it was driven by a lift in employee earnings or a further decline in the level of household savings.
- Nominal GDP is expected to slow sharply, reflecting a drop in commodity prices during the quarter. There’s no forecast offered for this measure but the CBA is looking for an increase of 0.2%, leaving it up 6.4% year-on-year.
The GDP report will be released at 11.30am AEST.
Business Insider will have all of the details once it hits the screens.
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