Australia Q2 GDP Growth Stronger than Expected

The Australian economy advanced 0.9 percent in the June quarter of 2018, above market consensus of a 0.7 percent expansion and after an upwardly revised 1.1 percent growth in the previous quarter. Growth was mainly supported by strength in domestic demand and foreign trade while fixed investment was flat.

In the three months to June, the largest contribution to GDP growth came from final consumption expenditure (0.6 percentage points), namely household consumption (0.4 pp) and government spending (0.2 pp). Also, exports added 0.2 percentage points to growth, while changes in inventories were neutral. On the other hand, non-dwelling construction substracted 0.1 percentage points off growth.

Final consumption expenditure rose 0.7 percent. Household spending increased 0.7 percent (vs 0.5 percent in Q1), driven by rises in food (1.3 pct), recreation and culture (1 pct) and insurance and other financial services (0.9 pct). Government spending went up 1 percent (vs 1.6 pct in Q1), due to state and local government (0.4 pct ) and national government (1.9 pct).

Gross fixed capital formation was flat. Private investment recorded no movement, with a rise in total dwellings (1.7 pct) offset by falls in machinery and equipment (-1.6 pct), and non-dwelling construction (-1.2 pct). Public investment was also flat. A rise for the general government sector (2.2 pct) was offset by a fall for public corporations (-5.8 pct).

Total inventories increased AUD 1.16 billion following a rise of AUD 1.24 billion in the prior quarter. The increase was driven by wholesale trade inventories, which recorded a strong build up for the second straight quarter. Also, public authorities and mining industry inventories increased during the quarter.

Exports of goods and services rose by 1.1 percent (vs 3 percent in Q1. Sales of goods increased by 1.1 percent, with non-rural exports (1.4 pct) and rural exports (3.9 pct) rising. Sales of services went up 1.2 percent. Imports of goods and services grew by 0.4 percent (vs 1.7 percent in Q1). Purchases of goods rose 1.7 percent, driven by both capital (4.4 pct) and consumption goods (1.6 pct). There was a decline in imports of intermediate goods (-1.0 pct). Imports of services fell 3.8 percent. 

By industry, agriculture grew by 0.8 percent  after experiencing four consecutive falls. The rebound was supported by rises in both livestock and grains. Also, mining rose 1.5 percent, driven by coal mining (4.7 pct), exploration and other mining support services (4.2 pct) and oil and gas extraction (1.5 pct). This quarter featured the biggest rise in coal mining since Q3 2014, due to strong demand for thermal and hard coking coal. In addition, construction grew 1.9 percent, due to building construction (1.5 pct), heavy and civil engineering (2.6 pct) and construction services (1.8 pct). Retail trade rose 1.1 percent, driven by food retailing and other store-based retailing. Information, media and telecommunications increased 1.8 percent after a fall in Q1. The rebound was explained by telecommunications services (2.8 pct) and other information and media services (0.6 pct). Financial and insurance services increased by 0.7 percent, supported by a rise in other financial and insurance services (1.5 pct). At the same time, rental, hiring & real estate services grew 1.7 percent, supported by property operators and real estate services (1.8 pct) and rental, hiring and real estate services (0.9 pct). Health care rose 1.3 percent, boosted by rises in both public and private health. On the other hand, manufacturing sector fell 1.5 percent following a  strong growth in Q1. The decline was driven by other manufacturing (-3.7 pct), petroleum, coal, chemical and rubber products (-3.2 pct) and machinery and equipment (-1.7 pct).

Through the year to the second quarter, the economy grew 3.4 percent, following a 3.2 percent expansion in the prior quarter and beating expectations of a 2.8 percent growth. It is the fastest annual pace of expansion since Q3 2012.

Australia Q2 GDP Growth Stronger than Expected

ABS l Rida |
9/5/2018 11:24:25 AM