Data Snapshot: GDP - Low Fuel Warning

The key points in this report are:

 

  • The Australian economy grew at a slow rate in the early part of this year, after a particularly weak second half of 2018. The weakness in the consumer sector and the impact of the housing downturn are major factors behind the subdued result.
  • In the March quarter, gross domestic product (GDP) grew just 0.4%. Annual growth stepped down from 2.4% to 1.8%, the weakest annual rate in 9½ years.
  • Domestic final demand also only eked out a 0.1% gain, which is the weakest quarterly gain since the September quarter of 2016. Prior to yesterday, the last time the RBA cut rates was in this quarter.
  • Public spending, business investment and the traded sector provided some modest support to economic growth. Household spending provided a small contribution, but dwelling investment and inventories detracted from growth.
  • In the quarter, Tasmania and QLD recorded the strongest growth rates, but NT shrunk sharply. In the year to Q1, NSW, Victoria and QLD each posted slower growth rates of 2.1%, 3.0% and 1.4%, respectively. NSW’s annual rate was the weakest in 5¼ years, Victoria’s the weakest in 4½ years and QLD’s in nearly three years. These three economies account for 75% of Australia’s economy.
  • The strongest performing industry in the quarter was arts & recreation services for the second straight quarter (+2.1%). The weakest sectors were related to residential housing and included construction and rental, hiring & real estate services.
  • Today’s data adds to our expectation the RBA will need to cut further, especially because some parts of the economy are likely to stay weak through this year. Moreover, we expect GDP growth in 2019 to be below trend and undershoot the RBA’s forecasts.

 

Please see the attached report for more information.



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