March quarter GDP data is out today and the question is can another solid trade surplus, a sharp rise in retail volumes and a lift in government spending offset the negative impact of weak wages, business investment, construction, and housing investment and the biggest fall in business inventories in six years?
Economists reckon growth could range from just under zero (-0.1%) to a sharp fall of 0.5% for the quarter. GDP grew 0.5% in the December quarter to be 2.2% higher over the year.
Current account data from the Australian Bureau of Statistics showed the country recorded an $8.4 billion surplus through the first three months of the year. It was the fourth successive surplus (totalling more than $23 billion).
A drop in goods exports was offset by rises in prices. Non-rural goods prices were up 2% in the quarter (thanks to higher iron ore prices) while they were up by 3% for rural goods.
Imports, though, fell substantially with inbound shipments of capital goods sliding 10% as the heat went out of business investment (which fell in the quarter as well).
The ABS said the strong surplus would add 0.5 percentage points to the March GDP. The retail trade data for March, released in early May, revealed that the panic buying in February and March had boosted retail volumes by 0.7% which will flow right into the national accounts and GDP.
At the same time the current account data revealed that our terms of trade rose a solid 2.9% in the quarter after a 5.3% slide in the December quarter.
Another boost to the national accounts will come from government spending which rose by $1.9 billion or 2% over the quarter. This will add 0.3 percentage points to growth.
But the bureau noted that general government capital spending fell by $657 million or 3.3%. It also said public gross fixed capital formation, down by 0.8%, would not detract significantly from growth.
That’s a sign the much talked about infrastructure spending boom is not having much of an impact on growth at the moment.
But on the downside business inventories fell by 1.2% in the quarter, the biggest fall in six years. It said this would detract from overall growth by around half a percentage point.
Wages and salaries through the March quarter were flat, which will be another negative for GDP.
