GDP +0.8% q/q and +1.8% y/y. Queensland doing much better

Posted on September 6, 2017 by Pete Faulkner - CAPEX, GDP, QLD, Uncategorized

The GDP data for the second quarter has shown a solid rebound from the weak data last quarter and is broadly in line with market expectations. On a seasonally adjusted basis GDP rose 0.8% for the quarter, or 1.8% from the same time a year ago. This brings the cumulative increase for the 2016-17 financial year to a 2.0% increase, which is the slowest pace of growth since the beginning of 2010.

The stronger growth this quarter can be posted to a solid increase in Public capital formation (which added 0.6 ppts) and net exports which added another 0.4 ppts. Inventories detracted 0.6 ppts.

While household consumption, the largest component of GDP, rose 0.7% q/q (and contributed 0.4 ppts to GDP growth) this was due to a further decline in the household savings rate, which has fallen to 4.6%, its lowest level since the pre-GFC levels of 2008. In the face of weak income growth households are simply running down savings to maintain consumption levels.

The less volatile Trend series shows growth at +0.7% (after some upward revisions to previous months) with annual growth at just +2.1%, the weakest result since Q2 2010.

In Queensland we see State Final Demand (which does not include the State’s strong export sector) up a solid 1.1% q/q (after Q1 was revised up from unchanged to +0.2%). Year on year growth is now running at +2.8% which is the best result in 5 years.

In Trend terms State Final Demand rose 0.7% q/q and as the second chart below shows is being kept positive by the impact of Public sector spending (most notably public CAPEX which is up 4.4% q/q). Private CAPEX data shows a 0.3% q/q increase and also saw previous quarters revised from slight falls to small rises.

Today’s data is a strongly positive sign for the State’s economy. Particularly when we combine this result with the signs of a solidly performing export sector which is likely to see Gross State Product data (when we finally get it) looking much healthier. For a government considering when to call an election this data should be a welcome addition.