GDP disappoints (again) and QLD slows

The fourth quarter GDP data released this morning came in lower than expectations as household consumption growth remained weak. The market had been looking for real GDP to lift about 0.4% for the quarter to give a 2.7% y/y figure. The result was just a 0.2% q/q lift which saw the year on year figure down to just 2.3% (seasonally adjusted).

Contributions to growth came from household consumption (up just 0.4% q/q and adding 0.2 ppts to GDP) and Govt Consumption which added 0.3 ppts to growth. Private fixed capital formation deducted 0.3 ppts.

With wages growth stuck around historically low levels (even though the latest wage price index showed a slight uplift to 2.3%), even this modest growth in household consumption is keeping the household savings rate low. Although it edged slightly higher this quarter (to 2.5%) it remains close to 10-year lows.

The ABS also provide us with quarterly data for State Final Demand, which is the domestic component of the state’s economy. The ABS estimates QLD State Final Demand to have lifted by 0.3% in the fourth quarter for  1.8% y/y and 2.8% annual growth rates.

As the chart above makes clear, the domestic side of the QLD economy is experiencing a marked slow-down.

The slowing in growth in the fourth quarter is largely due to a slowdown in private sector investment, which fell 1.8% q/q. The Public sector saw solid growth with government consumption growing at 1.3% q/q and public investment up 1.8% q/q. However, although the total public sector grew at 1.4% q/q this was largely negated by the much larger private sector contracting by 0.1% q/q. Household consumption managed a 0.5% q/q lift (equal slowest pace of growth since early 2016) but private capital expenditure fell (for the third consecutive quarter). (All QLD figures quoted are Trend)

The QLD 2018-19 Budget estimates that Gross State Product will lift by 3.0% in the 2018-19 year on the back of “household consumption gaining momentum and a contribution to growth from the trade sector as imports ease”. On the evidence of these relatively weak household consumption figures in the first two quarters of the 2018-19 financial year that projected growth may have to rely more heavily on the export sector than anticipated.

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