Australia’s Q4 GDP Growth Erodes!

Leave a comment
Australian Economy

The recent fears on the US metal tariffs are seen to be diluting a bit with many regions including Canada and Mexico being considered for exclusion from the tariffs as the US seems to be softening its stance on neighboring countries. On the other hand, Australia’s GDP data has come under spotlight at the domestic front.

The Australian economy in the fourth quarter ending December 2017 has witnessed a GDP (Gross Domestic Product) growth of a meagre 0.4 percent, which is below the market consensus of a 0.6 percent growth. This has been quite discouraging to see after an upwardly revised 0.7 percent growth of the third quarter. The fourth quarter GDP reflects the weakest growth rate since a contraction in the September quarter 2016. The Australian economy has expanded due to the strong contributions mainly from final consumption expenditure while non-dwelling construction and net trade reflected a downward effect. Further, on year-on-year basis, GDP has grown 2.4 percent in the fourth quarter, which is below the 2.5 percent growth forecast, and at a slower rate than the 2.8 percent pace posted in the previous quarter.

gm1.png 

GDP Growth Rates (Source: Australian Bureau of Statistics)

 Moreover, GDP in the fourth quarter got affected from a fall of net exports. The exports of goods and services fell by 1.8 percent, while the imports of goods and services rose by only 0.5 percent. The exports of goods fell mainly due to the 9.7 percent fall in the rural exports percent. The economy also witnessed 1.9 percent fall in the exports of services. Meanwhile, the imports of goods rose by 1.6 percent, due to a 4.7 percent rise in consumption of goods and 4.4 percent rise in intermediate goods, while the imports of services fell by 2.7 percent. On the other hand, Australia has recorded a trade surplus of $1.1 billion in the month of January with exports rising by 4 percent and imports falling by 2 percent.

In the fourth quarter 2017, the household consumption rebounded to 1.0 percent over the quarter due to a higher discretionary spending in hotels, cafes and restaurants with 2.9 percent and 2 percent rise in recreation and culture. On the other hand, the saving rate has now fallen to a new low, after the downward revisions, of 2.7 percent, which means that the consumption will not increase for much longer time without a continued strong jobs growth. The wage growth was lower than the 1.2 percent rate seen in the third quarter, and the average compensation per employee fell to zero over the quarter, not in line with the trends of last two years. Furthermore, the productivity growth remained muted with GDP per hour worked falling by 0.1 percent in 2017.

 The fourth quarter also witnessed 1.2 percent fall in the gross fixed capital formation as the private investment fell by 2.2 percent, partly due to 8 percent fall in the non-dwelling construction. However, the public investment increased by 2.9 percent in the December quarter, driven by 1.9 percent rise in state and local general government as assets were transferred from the private sector. Further, the investment in machinery and equipment grew by 3.3 percent in Q4 2017.

In addition, the production chain volume trends were mixed during the December quarter 2017 with mining growing 1.3 percent, construction expanding by 0.3 percent, information, media, telecommunications growing by 2.9 percent, while financial, insurance services grew by 0.1 percent, and healthcare and social assistance rose by 1.9 percent. However, during the period, agriculture, forestry and fishing fell by 2.7 percent, manufacturing fell by 1 percent and electricity, gas, water and waste services fell by 0.8 percent.

 Overall, the picture depicts some bit of deterioration in the living standards and productivity growth that has tarnished the so called ‘Australia’s improving economic scenario’.


 

Disclaimer

The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated websites are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.

Leave a Reply