GDP growth disappoints as households tighten purse strings

The GDP data for the 3rd quarter of 2017 has come in slightly below market expectations at +0.6% q/q (after Q2 was revised slightly higher to +0.9% from +0.8%) for a 2.8% y/y and 2.2% annual growth. The weaker data was due to a poor showing from household consumption (the largest component of GDP) which was up just 0.1% q/q; the slowest pace of growth since the GFC impacted numbers back in 2008. The largest contribution to growth came from Private CAPEX which added 0.8ppts and was up 4.6% y/y.

The data for Queensland State Final Demand (which does not include any export sector) saw SFD up 0.2% q/q (+2.7% y/y and +3.0% ann). Again, it was the household sector that was the drag here; household consumption was up just 0.3% q/q which was the poorest result since the GFC-impacted Q3 2008 data. Private CAPEX grew at 1.3% q/q which is the best result since Q1 2012.

We are still waiting for QLD Treasury to release their quarterly Gross State Product data (obviously help up by the recent QLD election) but once released this will provide valuable insight into how the whole (rather than just domestic) QLD economy is tracking.

 

Exports lead as QLD economy grows 3.9% y/y, 2.5% ann

Today saw the release by the Queensland Treasury of their estimates for Gross State Product for the first quarter of 2017. The ABS produce state Final Demand data on a quarterly basis (although this ignores net exports) but Gross State Product numbers only annually at the end of each financial year, so these quarterly estimates from Treasury are our only indication of how the total economy (incl net exports) is tracking. There is always some discussion about whether we can trust the Treasury quarterly data but we have always seen these as an excellent set of data; on the occasions when its data seems to diverge from ABS estimates we often see subsequent revisions bringing the two series back into line (see chart below for comparison).

On today’s data Gross State Expenditure (the “domestic” side of the economy) rose 0.3% q/q (after Q4 was revised down to +0.3% from +0.4%). This brings GSE on an annual basis to an increase of 1.3% (Q4 revised down slightly to +0.6%) which is the State’s best result since Q2 2013. The ABS have QLD’s State Final Demand at +1.0% ann (after +0.3% in Q4), which is the best result since Q1 2014. Private Sector Investment is still down 4.0% ann but this is the slowest pace of contraction since Q3 2014. As the chart below demonstrates, business investment has finally stabilised after the sharp fall following the mining investment boom. However, Household Expenditure (which is the single largest component) rose just 2.4% ann which is the slowest pace of growth since Q2 2015 and reflects weak wages growth.

When we add in net exports we arrive at a Gross State Product figure for Q1 which is up 1.2% q/q (after Q4 was revised up to +1.1% q/q), up 2.5% ann (up from +2.1% ann in Q4) and up 3.9% y/y. This compares very favorably with the national GDP data which shows a 1.6% y/y, or 1.1% ann, increase.

Although annual Gross State Product has grown by $7.9 bn since Q1 2016 the huge turnaround in Net Exports (which have gone from a $900 million deficit a year ago to a $4.9 bn surplus now) is the main reason for the growth.

However one spins these numbers they look like good news. The domestic side of the economy, while hardly roaring, is ticking along slightly faster than the nation as a whole and booming exports has the State growing at almost 2 1/2 times faster than the country as a whole. There will be some concern that the impacts of Cyclone Debbie and a higher A$ will drag the Q2 figures weaker but (barring further significant moves in the Aussie or a collapse in resource prices…neither of which we think likely) any such result is likely to be short-lived and have little impact on annual growth rates. The challenge for the State Government, as the Courier Mail points out today, will be to convert this solid growth into jobs and, ultimately, rising incomes.

Pete spoke to radio 4CA this morning about the data, and tourism into TNQ. You can listen below.