Here's why rain could be to blame for Australia's weak GDP last quarter

‘Blame it on the rain’ just like Milli Vanilli. Photo by Michael Putland/Getty Images

Blame the weather is a well-used caveat, not just in everyday life, but also in financial markets whenever economic data has been lousy and used to excuse other factors that may have contributed to the weakness.

Sometimes, nature deserves it but often she doesn’t.

However, when it comes to Australia’s “shockingly-weak” Q3 GDP report yesterday, perhaps the weather “caveat” was appropriate.

Just have a look at this map from Australia’s Bureau of Meteorology (BOM) of rainfall patterns during the quarter.

It is quite literally the “BOM”.

Source: BOM

With the exception of Western Australia and the Northern Territory, it was a wet quarter and very wet in some cases.

All other states and territories had either their wettest or second-wettest May to September on record this year.

This, CBA chief economist Michael Blythe says, likely played a part in the quarterly GDP decline.

“Not surprisingly, the ABS was at pains to point out that poor weather conditions account for a large part of the large fall in construction activity in Q3,” he said.

“GDP excluding construction fell by ‘only’ 0.2%. Adverse weather conditions probably also had an impact on mining production.”

Blythe notes that “rainfall data for October/November was generally below average”, pointing to the likelihood of a significant bounce-back in construction activity in the fourth quarter.

Alongside rainfall, Blythe says that above-average temperatures during the quarter may have been another factor that curtailed growth.

“This outcome probably contributed to spending weakness in some areas such as clothing,” he says.

NOW READ: Here’s what economists are saying about Australia’s ‘shockingly weak’ GDP report

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