Gloom continues about the health of the economy in the three months to March with economists at the National Australia Bank weighing in with a mostly negative update about GDP, to go with an update from the AMP’s chief economist, Dr Shane Oliver.
Dr Oliver in early May was the first leading economist to suggest a sharp slowdown or even a negative reading in next Wednesday’s March quarter National Accounts.
Yesterday he refined his forecast based on data issued so far, including the weak investment figures and construction work done, retail sales and slowing dwelling investment for the quarter.
As a result Dr Oliver now expects GDP to rise by 0.1% quarter on quarter and 1.5% in the 12 months to the end of March.
But this is provisional and he warned “there are still plenty of partial indicators to be released next week that will firm up our estimate.” These include wages and salaries, business inventories, sales, the current account and government finance figures.
“The risk is that negative disruptions to trade from cyclone Debbie will mean another weak (or negative) June quarter GDP result,” Dr Oliver added.
But the NAB economists said say there’s a real chance growth could end up around a negative reading of 0.1% for the quarter (based on the data released so far).
"This would be the second contraction in three quarters, following the strong growth of 1.1% in Q4 2016 and decline of 0.5% in Q3 2016. The year-ended rate of growth would slow to 1.3% y/y, the weakest rate since Q3 2009.”
And they warned that “there is also some small possibility of a negative GDP print in Q2 (which would take Australia into technical – but not real – recession), given the hit to coal exports from Cyclone Debbie, although there should be enough offset from LNG exports and government spending to keep GDP in the black.
“While some of the contraction has undoubtedly been driven by the weather and other one-offs (as in Q3 last year), the question for next week will be whether the slowdown includes signal as well as noise, and implies a more fundamental economic slowdown,” the NAB team wrote yesterday.
