The Australian economy grew by just 0.1% in the September quarter, kept in the black mostly by the recovery in rural Australia from the terrible drought of the past couple of years (which remains in much of the country though).
But in reality it went backwards with non-farm GDP shrinking 0.3%, according to figures from the Australian Bureau of Statistics for the September quarter’s National Accounts.
But there is no joy whatsoever from these figures except that there are better times in some parts of regional Australia with higher grain harvests forecast.
So will the belief of some economists that the economy’s woes have deepened since September 30, be vindicated early next March when the December quarter GDP figures are released?
Or will the $10.4 billion 0.8% of GDP stimulus package and the 3% cut in the cash rate by the Reserve Bank, kick in to give us another small, positive growth quarter?
Either way, the economy is close to stalling speed and the downward pressure from the global recession from April onwards will be enormous as iron ore and coal prices fall by over 30% and more and depress our terms of trade and national income: deflation and falling growth could be the big news story from April through to December next year.
Monday’s performance of manufacturing index for November told us this quarter was tough with a fall to a record low. This morning it was the same index for our bigger services sector.
The news was again bad, another record low.
The Australian Industry Group-Commonwealth Bank of Australia performance of service index fell 4.3 points to 37.8 points in November, the weakest reading since the monthly series began in 2003.
The drop from 42.1 points in October in the economy’s most important sector illustrates the extent of the slowdown here and offshore.
The index has been below the 50 point level that separates growth from contraction since April, but lurched downwards in November, as the manufacturing index did.
The index readings for services sales, new orders and employment all fell to record lows in November, with all sectors and states reporting a decline in activity.
Both surveys have made the GDP figures a bit historical, but they nevertheless send a message of an economy slowing. Nothing since September 30 has altered that assessment.
As well as the bounce in the bush, it was the lingering echoes of the construction surge associated with the resources boom, and solid spending on infrastructure was also a plus in the quarter.
But lower contributions from the financial sector (the credit crunch and sharemarket collapse), property (the housing slide) and transport and storage almost tipped the economy into the red in the quarter.
Imports detracted from growth, as did the impact of the financial crunch in the sharemarket (called quaintly "Private Investment Ownership Transfer Costs" which were a negative 0.2%.
As predicted, imports detracted by 0.4% as the volume of exports slowed (the resources boom being pricked in the quarter), while high prices for coal and iron ore maintained the illusion that the export sector was doing well. (It was, but not as well as the figures implied at first glance.)
The ABS said: "In seasonally adjusted terms, GDP increased by 0.1% in the September quarter. Non-farm GDP decreased by 0.3%.
The Terms of trade rose 5.6% and Real gross domestic income rose 1.4%.
"The farm sector rose 14.9%, albeit from a low base in the quarter to be up 11.3% through the year. The fall in non-farm GDP of 0.3% left it still positive for the year, up 1.7% through the year.
"The September quarter outcome was also affected by the impact of the gas plant explosion on Varanus Island in Western Australia, which is evident in the weakness of exports in the September quarter.
“The impact of this explosion is estimated to have subtracted around 0.25% of a percentage point from GDP growth in the September quarter.
"In seasonally adjusted terms, the main contributors to the increase in expenditure on GDP were Engineering construction investment (0.4 percentage points), Public gross fixed capital formation (0.2 percentage points) and Inventories (0.2 percentage points).
The largest negative contributions came from Imports (-0.4 percentage points), Ownership transfer costs (-0.2 percentage points) and New building (-0.1 percentage points).
In seasonally adjusted terms, Agriculture, forestry and fishing contributed 0.3 percentage points to GDP growth, while Construction contributed 0.1 percentage points. Transport and storage, Property and business services, and Finance and Insurance services all detracted 0.1 percentage points."
The 0.1% rise, seasonally adjusted was down, from a revised 0.4% gain in the June quarter (0.1% originally).
The result was the weakest since December 2000. Analysts expected an 0.2% increase for the quarter. Annual growth for the July-September period came in at 1.9%, weaker than the previously reported 2.7% rise for the June quarter.
The yearly outcome matched analysts’ forecasts.
The Reserve Bank Tuesday sliced 1% from the cash rate to 4.25%; these figures ensure another rate cut will come next February with the market already pricing in an 0.75% chop.
November’s unemployment figures will tell us if the lag in unemployment has finally started to quicken up to match the slumping economy, as it has in the US.
America’s November jobless numbers are tipped to jump by over 300,000 when the figures are released on Friday night, our time. We are still a long way from that problem, as yet.
Looking at some of the detail in the accounts, household final consumption tells the story: Australian consumers stopped spending in a big way in the quarter.
The National Accounts show that households pulled back on their spe
