Australia: Q1 GDP growth impacted by weather disruptions – Westpac

The Australian economy eked out a 0.3% increase in the March quarter 2017 as the annual real GDP growth eased from 2.4% to 1.7%, the slowest pace since September 2009 due to weather related disruptions, explains the analysis team at Westpac.

Key Quotes

“GDP per capita annual growth is only 0.2%, the weakest since March 2013.”

“Nominal growth was far stronger at an above trend 2.3%qtr, 7.7%yr, with national incomes boosted by a sharp rebound in commodity prices. The terms of trade rose by 6.6%qtr, 24.8%yr in March.”

“Activity in the quarter was significantly dented by weather disruptions. Home building activity fell by 4.4%, as work was temporarily halted in Qld and NSW, subtracting 0.25ppts from growth. Resource exports contracted by a sharp 4.6%, in part due to disruptions, subtracting 0.5ppts from growth. Against that, mining inventories rose, making a positive contribution.”

“For Q1, the GDP arithmetic was: domestic demand 0.3%; inventories +0.4ppts, net exports -0.7ppts and the statistical discrepancy +0.2ppts.”

“Relative to a year ago, real GDP growth has slowed from 2.5% to 1.7%. The slowdown is evident across: consumer spending, 3.0% to 2.3%; home building activity, +8.3% to -2.5%; and net exports, +1.6ppts to -0.4ppts.”

“There are some notable positives supporting conditions. The international backdrop has improved, with world growth and world trade strengthening. Domestically, the mining investment downturn is nearing its end and commodity prices and national income have swung from a headwind to a tailwind. That said, the boost to national income from the rebound in commodity prices is not flowing through to the household sector.”

“Business investment increased in Q4, +1.4%qtr, and in Q1, +0.7%qtr, the first back-to-back gains since 2012.”

“The still relatively low Australian dollar is proving some support to trade exposed sectors, notably service exports, which grew by 2.5%qtr, 7.6%yr in Q1 adding 0.3ppts to annual growth.”

“RBA Governor Lowe in his statement accompanying the decision of the June Board meeting noted that: "year-ended GDP growth is expected to have slowed in the March quarter, reflecting the quarter-to-quarter variations in the growth figures". He then argued: "looking forward, economic growth is still expected to increase gradually over the next couple of years to a little above 3%".”