Well, on to next week’s Reserve Bank board meeting for the excitable among economic writers and analysts after we survived the Great March Quarter GDP scare.
The world didn’t end, we didn’t have a national calamity and it’s only a set of backward looking figures, a sort of semi-current economic update.
Yes, growth contracted 1.2%, after the 0.7% rise in the December quarter and 0.2% improvement in the three months to September.
Over the year to the end of March, GDP grew 1%, seasonally adjusted, the Australian Bureau of Statistics (ABS) said.
But look behind the figures and we find a solidly growing domestic economy strong enough to withstand a tremendous shock that it hadn’t experienced for 20 years or more.
The contraction came from the slump in coal production and exports, as well as a smaller fall in iron ore shipments: and the blame can be sheeted home to the floods and cyclones, not to demand from our big customers such as China, India or South Korea, or Japan for that matter.
As was reported in Tuesday’s balance of payments data for the quarter, net trade (exports minus imports) cut 2.4% from growth, which was impossible for the rest of the economy to make up (annualise that like the Yanks do and its a 9.6% fall in trade, which is verging on depression levels if it was sustained for 12 months).
Outside the hit to export volumes, domestic demand was strong, expanding by a very healthy 1.3% in the quarter to be up 3.3% on the year.
But there were more than a few signs of growth in the domestic economy; a rise in the terms of trade offset the contraction in volume terms to produce a flat outcome in real gross income for the three months: that is probably the more important of the measures.
That includes a 3.4% jump in private gross fixed capital formation, mostly reflecting the economy’s gathering mining development boom.
Household spending also is chugging along, rising 0.6% in the quarter to be up 3.4 % over the year. (All these numbers are in volume terms which take away inflation.)
So household consumption was positive, while the savings ratio jumped noticeably to more than 11%.
And why can consumers save more and keep spending?
Because employment remains very strong, and wages growth is running at a touch under 4% a year.
So much for the two speed economy and excessively cautious consumers.
And that’s why the Reserve Bank will keep its finger on the rate rise trigger.
In its release yesterday the ABS said:
"Latest figures show that GDP, in seasonally adjusted volume terms, declined 1.2% in the March quarter 2011. This is the largest quarterly fall in GDP since the March quarter 1991.
"Flooding which began in late December 2010 combined with cyclones in both Queensland and Western Australian have had a significant impact on the March quarter activity. Despite the fall in GDP volumes there was an increase of an increase of 0.3% in Real gross national income driven by an increase of 5.8% in the Terms of trade on the back of stronger commodity prices.
"The main detractors to expenditure on GDP were Net exports (-2.4 percentage points) and Inventories (-0.5 percentage points). Private gross fixed capital formation (0.7 percentage points) was the largest positive contributor.
"From an industry perspective the main detractor to GDP was Mining (down 6.1%) with a 0.6 percentage point’s detraction, while Manufacturing (down 2.4%) and Agriculture (down 8.9%) both detracted 0.2 points from GDP."
Nothing of any surprise there after the record fall in trade outlined in Tuesday’s balance of payments for the March quarter.
That rise in household consumption was achieved despite the savings ratio RISING to 11.5% from 9.7% in the originally reported figures for the December quarter and 10.8% in the three months to December, It’s no wonder the domestic economy is running sluggishly, but hasn’t stalled, as some would have had us believe yesterday and this morning.
The ABS said real gross domestic income (seasonally adjusted) was flat in the March quarter, while the volume measure of GDP decreased by 1.2%, reflecting the 5.8% lift in the Terms of trade.
Sounds rather normal to me.
And what will everybody say if the economy bounces back with a 1% rise in GDP in the current quarter.
It will pay to read today’s April trade figures, they could very well give us an early clue. Retail sales are also out today.
On to the RBA meeting next Tuesday and the jobs figures next Thursday.
Another solid month for commodity prices for Australia in May.
The Reserve Bank said yesterday that there was a 1.5% rise in its commodity price index in may, even though many commodity prices fell in the month after the silver sell off on may 7.
"Gold prices also rose in monthly average terms, while crude oil prices, base metals prices and most rural commodity prices fell," the bank said.
"Preliminary estimates for May indicate that the index rose by 2.3 per cent (on a monthly average basis) in Special Drawing Rights (SDR) terms, after rising by 7.3 per cent in April (revised).
"The largest contributors to the rise in May were increases in the estimated export prices of coal and iron ore, reflecting the ongoing movement t
