Good news and bad from yesterday’s final batch of data that feeds into the March quarter National Accounts and GDP report to be released later this morning.
The good news is that the country’s current account deficit narrowed to its smallest in more than 15 years last quarter, thanks to continuing ripples of the late 2016 commodity price boomlet.
And the terms of trade rose 6.6% in the quarter against an initially reported rise of 6.1% in the December quarter – that could save the GDP report from showing a sharp contraction by boosting gross national income and net disposable income for the three months.
The bad news is that while a current account deficit was again reported, it only narrowed slightly to $3.1 billion, from $3.9 billion, against a very optimistic market forecast of $500 million.
But wait there’s more bad news because of weak growth in export volumes, the current account will cut GDP by 0.7 of a percentage point, increasing the chances of a sharper than expected slowdown in GDP growth.
The strong December quarter current account and a sharp fall in the deficit contributed 0.2% growth to GDP of 1.1%.
The volume of exports shipped also slipped, partly due to bad weather, and that will help shave the larger than forecast 0.7 percentage points from real gross domestic product (GDP).
And government finance data for the quarter was weak, showing government spending added only marginally to growth in the first quarter.
All combined, that left analysts forecasting the economy expanded a meagre 0.2% in the quarter, a step back from the previous quarter’s brisk 1.1%, but better than the surprise 0.5% in the September quarter.
Growth for the year is forecast to slow to a range of 1.3% to 1.6% from 2.4% at the end of 2016.
A big unknown is household consumption which surprised with its strength late in 2016, but is being held back by record-low wage growth and high levels of mortgage debt.
That is showing up in the weak retailing data for the March quarter which is expected to contribute around 0.1% to GDP growth, down from 0.7% in the December quarter and a flat outcome in the weak September quarter.
