Today’s second quarter growth figures are looking more and more lineball after the June quarter’s balance of payments were released yesterday.
Depending on the impact of the government finance figures, also released yesterday showing a rise in spending in the June quarter, the chances are that growth could again be marginal in the quarter.
As well, a sharp upward revision in the size of the March quarter’s current account deficit could see the 0.4% rise in Gross Domestic Product trimmed in today’s figures, if other parts of the national accounts don’t change.
Some economists are now warning that growth could dip into the negative in the June quarter by around 0.1%, or be positive by the same amount.
The flow of figures this week has been very different to the strength shown last week by the better than expected construction spending and business investment (which was up 3.3%, helped by the tax incentives form the government’s stimulus packages).
Now the growth picture for the economy is very different to that late last week when a number of economists lifted their growth forecasts for the June quarter to 0.7% to as much as 1%, and brought forward the timing of the first rate rise to October-November.
The data flow of Monday and yesterday tell a very different story and is likely to allow the Reserve Bank to hold off a rate rise for a while longer.
The current account deficit doubled in the June quarter, as export prices fell and imports rose, a move not unexpected.
The deficit hit a seasonally adjusted $13.347 billion, worse than the $10.7 billion deficit predicted by economists.
The gap widened from a revised $6.346 billion shortfall recorded in the March quarter.
The ABS estimated the rise would detract 0.2% from growth in the national accounts.
The revision upwards in the March quarter deficit (which was originally reported at $US4.61 billion) could see the 0.4% growth in that quarter trimmed.
At the time the ABS said "In seasonally adjusted chain volume terms there was a decrease of $5,964m (87%) in the deficit on goods and services. This is expected to add 2.2 percentage points to growth in the March quarter 2009 volume measure of GDP."
That decrease has been cut to around $4 billion in the March quarter, assuming there have been no other adjustments made. That would reduce the 2.2 percentage points added to the volume measure of GDP.
Monday’s larger than expected rise in business inventories in the quarter is estimated to have cut growth by as much as 0.8%, meaning that to be positive, government spending, business investment and construction spending and retail sales will have to add more than 1%.
With company profits weak and wages and salaries lower in the quarter, the private sector income side of the national accounts will be weak.
The expenditure side will be influenced heavily by the federal government’s cash splashes in April and May, while the volume measure will be weak because of the impact of the rise in the size of the current account which is opposite to what happened in the March quarter.
The ABS said that general government final consumption expenditure rose by 0.8% in the June quarter in seasonally adjusted chain volume terms.
General government gross fixed capital formation rose by 3.4% while gross fixed capital formation by public corporations fell by 2.8%. Total public sector gross fixed capital formation (general government and public corporations combined) rose by 0.8% in the quarter.
The ABS said that total public sector spending, including government consumption and public sector capital formation, rose by 0.8% in the June quarter.
The estimates correspond to the public sector aggregates accounting for about 21% of gross domestic product (GDP) and imply public sector spending added 0.2 percentage points to GDP growth in the June quarter.
That will offset the negative impact of the current account, leaving the rest of the economy to generate enough growth to offset the big impact of the inventories figure.
Meanwhile the stronger than expected nature of the construction side of the economy was again highlighted with a rise in building approvals in July, with private houses up, and a big rise in investor approvals.
The Australian Bureau of Statistics reported that the seasonally adjusted estimate for total dwelling units approved rose 7.7% in July, the second rise in as many months.
Private sector housing rose 1.5% and private sector ‘other dwelling’ jumped 35.3% to continue this series very volatile month to month moves.
The ABS said that the seasonally adjusted estimate for the value of total building approved rose 5.7% in July.
"The seasonally adjusted estimate for the value of new residential building approved and the value of alterations and additions approved rose 11.7% and 12.8% respectively. The seasonally adjusted estimate for the value of non-residential building fell 0.3%."
That rise in private housing approvals is the first home buyer’s grant at work.
And Australian manufacturing had a good August.
The performance of manufacturing index (PMI) rose 7.2 points from July to 51.7, the highest level since March of last year, according to survey from the Australian Industry Group and PricewaterhouseCoopers.
(A reading above 50 signals manufacturing is expanding.)
“Manufacturing activity has been improving month by month,” said AIG chief, Heather Ridout. She said&n
