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The second quarter GDP release this morning has come in bang-on expectations with a 0.5% increase for the quarter, giving us a (slightly below trend) growth of 3.1% for the year. Some of the data previously released for the quarter had pointed towards the possibility of a weaker print, so these numbers will probably be seen as rather stronger than they might have been. After a weak showing in Q1 it was inventories which led the way this quarter, contributing 0.9ppts to growth. Net exports subtracted 0.9ppts, while household consumption (the largest component in GDP) rose by 0.5% q/q to contribute 0.3ppt to growth.
Despite CPI rising to 3% in Q2 the Gross National Expenditure Implied Price Deflator fell to just 2%, reflecting the fact that a component of price rises (such as they are) are now coming from the import side of the economy on the back of the slight A$ weakness. This is a significant turn-around from 2 years ago when CPI was running at 1% below the IPD as the A$ went from strength to strength, kept import prices low and subtracted from CPI.
There is little sign of any return to confidence from the Aussie consumer with the household saving ratio virtually static around 9.4% for the past 3 quarters.
Queensland has broken its run of negative growth quarters (see last quarter’s commentary) posting a 0.4% increase to State Final Demand; although this still equates to a 0.4% fall over the year. Growth in QLD all came from public sector investment which was up 7.5% (although this only accounts for about 6% of State Final Demand). The private sector (which is 78% of all demand) was flat with both consumption and investment virtually static. Public sector consumption fell 0.1%.
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