The second quarter GDP data released this morning was slightly weaker than expectations, although upward revisions to past quarters saw the year-on-year number actually somewhat better than had been hoped for. Seasonally adjusted GDP rose 0.4% q/q for a year-on-year increase of 1.7% (up from 1.6% in the previous quarter). The Trend series showed year-on-year GDP increase from 1.7% in Q2 to 1.8% for Q3.
Contributions to growth came from household consumption (up just 0.1% q/q and adding 0.1 ppts to GDP), Govt Consumption which added 0.2 ppts and Net Exports which contributed 0.3 ppts to growth. Private fixed capital formation deducted 0.2 ppts while inventories added another 0.1 ppts.
The sharp move up in the household savings rate (to 4.8% and its highest in 10 quarters) points to the fact that households are preferring to use tax breaks to repair balance sheets rather than boost spending (as the govt would have hoped).
Trend data for State Final Demand in Q3 has QLD up 0.1% q/q for a year-on-year increase of just 0.9% (unchanged from Q2) As the chart below makes clear, the domestic side of the QLD economy has experienced a marked slow-down.
The slowing in growth in the second and third quarters is largely due to a slowdown in private sector investment, which fell 2.2% q/q. The Public sector saw solid growth with government consumption growing at 1.1% q/q and public investment up 1.0% q/q. However, although the total public sector grew at 1.1% q/q this was largely negated by the much larger private sector which fell (-0.2% q/q). Household consumption managed just a 0.4% q/q lift but private capital expenditure fell (for the sixth consecutive quarter). (All QLD figures quoted are Trend)
Growth in the domestic QLD economy is almost exclusively from the public sector with the private sector as a whole now declining. Indeed, the total private sector has seen (slight) declines in all of the past 5 quarters and is now 0.7% below the level seen in the second quarter of 2018. The Public sector, over the same period, has increased by 6.5%.
The State cannot continue to rely exclusively on the Public sector for growth and will need to see some return to private sector growth in coming quarters if we are not to slide further.
The Dec CONUS Quarterly is now available for download below. It includes our FNQ economy roundup as well as a special feature on regional economic diversity.