ASX: GDP beats forecasts in Q1
The Australian economy grew at a faster pace than economists expected in the March quarter, data from the Australian Bureau of Statistics shows.
Gross domestic product (GDP) grew a seasonally adjusted 0.9 per cent in the three months to the end of March, the ABS said.
The result slightly beats expectations. Economists surveyed by Bloomberg had tipped a 0.7 per cent growth rate for the quarter. The result is an increase on the 0.5 per cent pace of growth in the December quarter.
Over the 12 months to March, seasonally adjusted GDP grew by 2.3 per cent. The full-year figure remains well below the long-term growth trend rate of around 3.25 per cent and is slower than the 2.5 per cent growth rate achieved in the previous quarter.
Analysts had expected an annual growth rate of 2.1 per cent.
Today’s data comes after the federal government tipped real GDP growth of 2.75 per cent in 2015-16 in its May budget, which is at the top end of the RBA year-average forecast issued in its most recent Statement on Monetary Policy, of between 2 per cent and 3 per cent growth.
The terms of trade fell 2.9 per cent in the three months to March, and 11.4 per cent over the year, in seasonally adjusted terms.
Real GDP per capita rose by 0.6 per cent in the March quarter — it’s strongest quarterly result in three years — but is still only 0.8 per cent higher over the year.
The GDP chain price index, a broad measure of inflation, was unchanged in the quarter and was 1 per cent lower over the year.
Final consumption expenditure grew 0.5 per cent, seasonally adjusted, in the quarter, for an annual growth rate of 2.4 per cent.
Total gross fixed capital formation – investment by households, businesses and government – fell 1.2 per cent in the quarter and was down 3.4 per cent over the year.
Private residential investment rose by 4.7 per cent in the March quarter, following growth of 3.9 per cent last quarter, to be 9.2 per cent higher over the year.
Government spending was driven lower by reduced defence spending, while non-defence spending partly recovered recent losses.
Treasurer Joe Hockey says the latest growth figures show strong and broad-based momentum in the Australian economy.
“This is a good, solid result … completely consistent with our measured and appropriate budget forecasts, including our expectation of 2.5 per cent GDP growth for this financial year,” Mr Hockey told reporters in Canberra.
JP Morgan economist Ben Jarman said the upbeat result was supported by positive exports and home building numbers.
“It looks like exports did well… and you had home building also having a decent contribution,” he said.
He said the data also showed mining investment was still a weak point in the economy, labelling it a “key downside risk”.
Mr Jarman said the GDP figures would likely keep the Reserve Bank from cutting the cash rate for some time.
The RBA kept interest rates on hold on Tuesday after cutting them to a historic low of 2 per cent in May.
“The quarterly result was stronger than the RBA was forecasting in their last statement on monetary policy, so it helps them stay on the sidelines for a while,” Mr Jarman said.
“Things look reasonable for the economy underneath.”
NAB chief markets economist Ivan Colhoun described the data as quite a good result.
“It does highlight the mixed nature of the economy, we’ve got weak mining investment, strong housing construction, moderate consumer spending, strong export growth,” he said.
“We’ve got a very diverse economy at the moment depending on which sector of the economy you’re talking about.”
Mr Colhoun said there is still a lot of room for improvement, especially in the areas of consumer spending and business investment.
He said the data would make an interest rate cut by the RBA later in the year less of a possibility.
“The Reserve Bank is focused on the outlook and is still expecting weak mining investment but I think this will have been stronger than their expectations.”
Source: TheAustralian – GDP beats forecasts in Q1
