Today’s release of the fourth quarter 2014 GDP data has come in broadly in line with market expectations. Quarterly growth was +0.5% for an annual increase of 2.5%. This compares with +0.4% q/q in Q3 (revised up from +0.3%) and +2.7% ann. The main drivers of growth were net exports (largely on the back of weaker imports) which added 0.7ppts and household consumption which added 0.5ppts; the main negative was inventories which deducted 0.6ppts. If there is a bright point in this data it is from the household consumption figures. The quarterly increase of 0.9% was the fastest rate of growth since the first quarter in 2012. This seeming improvement in household confidence is reflected in a fall in the household saving rate which dropped to 9.0%; its lowest level since Q2 2010.
The Implied Price Deflator data confirms what we already know; inflation is of no concern at present. The GDP IPD fell by 0.7% over the year after a flat result in Q4. The Gross National Expenditure IPD (which removes the impact of foreign trade prices) was up just 1.6%, broadly in line with the CPI at 1.7%.
Clearly national GDP growth remains well below the long-term trend of about 3.25%.
In Queensland things look even less rosy. The quarterly State Final Product data (which does not account for net exports and therefore downplays QLD’s performance since we are such a major source of foreign exports) shows a decline of 1.0% for the quarter and is the second consecutive quarter of falls (Q3 was down 1.7%). Annually SFD is down 3.4% which is the fastest rate of decline since Q3 2009.
Household consumption in QLD actually held up reasonably well (+0.8% q/q) but it was a sharp fall in Private Fixed Investment (down 2.8% q/q) that dragged the state’s figures down. This is disappointing but not surprising given the much discussed mining investment slowdown and its dramatic impact in QLD.