The June quarter and financial year GDP data will be out later this morning in the National Accounts and there’s growing indications they will be a bit stronger than expected.
The Federal government first forecast GDP would grow 2.75% in the 2014-15 budget, but trimmed this figure to 2.5% in last December’s mid-year economic forecast.
The RBA forecast in its latest monetary policy statement was 3.25%, but in May it was in the range of 2.5% to 3.5% which is what the forecast is for calendar 2016 and 2016-17 at the moment.
Now the annual rate could very well reach 3.6%!
In the past week economists have significantly lifted their estimates for the June quarter from around 0.3% to 0.4% to as high as 0.7% and possibly 0.8%, that is despite the weak investment and construction work data from last week.
But home building (residential) figures were better than expected in the construction data, and that could be important.
The only significant difference in yesterday’s final statement from RBA Governor, Glenn Stevens, with his July statement was the dropping of the phrase “at a moderate pace” from the paragraph that read in part, “(R)ecent data suggest that overall growth is continuing.
Economists wonder if this is the Reserve Bank accepting that GDP will be growing better than (a moderate) trend for the next few quarters (around 3%).
In fact the GDP data out later this morning could see GDP growing at a 3.3% – 3.6% rate in the year to June (barring revisions to past quarters).
The 6.9% jump in corporate profits in the June quarter and a 0.3% gain in inventories in the same three months (but subdued wages and sales growth in the same period), will offset the 0.2% detraction from growth by the $1 billion fall in the goods and services surplus in the June quarter.
The quarterly current account deficit came in at $15.5 billion slightly bigger than the (much smaller) revised $14.9 billion deficit in the three months to March..
That saw a clutch of economists and banks upgrade their GDP estimates. UBS lifted its forecast to 0.6% quarter on quarter from 0.4% (giving annual growth before revisions of 3.5%, the best growth since 2012).
JPMorgan made a similar upgrade, ANZ sees growth at 0.4% and an annual rate of 3,3%, Citi lifted theirs to a very solid 0.7% and the CBA’s estimate is now 0.5% with an annual rate of 3.4%.
If GDP growth is positive, then it will mean Australia will be celebrating its 25th year of unbroken economic growth annual growth on Wednesday (but not quarter on quarter).
Watch for the 1.1% rate surge in the March quarter, to be revised. The Bureau of Statistics said in yesterday’s current account report that there had been a raft of changes for the March quarter. mostly to the income side (not the volume side) of the national accounts.
"There has been a substantial revision to the primary income credits series of non-financial corporations and consequentially to the reinvested earnings series for the March quarter 2016. This is a result of revisions to data reported to the ABS in the March quarter 2016,“ the ABS said.
The revision came after big changes to reinvested earnings by companies. As a result, the March quarter current account deficit was revised down to $14.8 billion by the Australian Bureau of Statistics from the previously reported $20.8 billion.
As a result, although the deficit actually widened from the previous quarter, it still came in well below market forecasts. The terms of trade, the ratio of export prices to import prices, rose by 2.3%, the first rise in more than a year.
