Instead of the much-talked about mining and investment boom providing the impetus for the small positive growth in the quarter (and keeping intact our long almost unbroken chain of positive quarters) there was a very old-fashioned explanation (for Australia), the rebound in the bush with the return of good rains and growing conditions.
The Australian Bureau of Statistics reported yesterday that third quarter economic growth was a tepid 0.2%.
The ABS said non-farm GDP fell 0.2% in the quarter, a sign of the extent of the slowdown in sectors like retailing, construction and home building.
So without the rain and the rural rebound, growth would have been negative.
It was the ending of the big dry in many parts of the country this year (El Nino) and the return of wet, humid conditions (La Nina) that was the biggest influence on September quarter growth, once again confounding those who claim weather and climate don’t really impact us humans.
According to the ABS, Farm GDP production, in chain volume measures, jumped 21% in the September quarter to be 11.1% higher in the year to September.
The ABS said, "The industry that drove growth in the September quarter was agriculture, forestry and fishing with an 18.5% increase in seasonally adjusted volume terms driven by strong crop forecasts".
So, for the September quarter at least, the economy can thank not the iron ore miners of WA or the coal giants of Queensland or the gold and LNG companies, but the elements and our most traditional commodity sector for keeping the growth dream alive for another three months.
But this meant that an economy that created just over 106,000 new jobs in the three months to September saw growth in the same period slowed to a stutter.
This is not a set of figures to get all concerned about. In fact the economy is travelling quite steadily, except for some obvious price and inflation pressures around wages and project costs.
The slowdown was expected: retailers from Harvey Norman, to David Jones, Myer and grocery and hardware wholesaler Metcash have been moaning about how tough trading has been, blaming everything from interest rates to the stronger dollar, consumer caution, political uncertainty and the banks.
But the reality is that after the strong 1.1% jump in second quarter GDP (restated from a 1.2% estimate originally); a slowdown was to be expected.
Annual growth in the year to September was 2.7%, down from the 3.4% in the year to June.
In the September quarter an 0.6% increase in household expenditure and an 0.9% increase in gross fixed capital expenditure were the main drivers, partially offset by a 2.4% fall in exports and an 0.5% fall in imports
The median market forecast was for growth of 0.5% in the September quarter and an expansion of 3.4% in the year to the end of September.
The surge in the terms of trade slowed to a rise of 0.8% in the September three months as prices for iron ore and coal fell and export volumes stopped rising strongly.
Household consumption and investment in non-residential dwellings were both strong in the quarter.
The ABS said that household final consumption expenditure rose 0.6% in the quarter and was up 3.2% over the year to September, in seasonally adjusted terms.
Total investment in dwellings fell 1.8% in the quarter, adjusted, to be up 3.4% in the year to September.
And total gross fixed capital formation rose 0.9% in the quarter and was up 6.8% in the year (that’s the mining boom).
Domestic final demand rose 0.6% in the quarter and was 4.4% higher over the year, while gross national expenditure (GNE) rose 0.4% in the quarter and was up 4.3% in the 12 months to September.
The ABS said the he chain price index of domestic final demand, in original terms, rose 0.5% in the September quarter and was up 1.7% over the year.
But it was the change to the savings rate that stood out The household savings rate reached 10.2% in the September quarter, up from 8.9% in the previous three months (which had been revised upwards.
Three years ago that rate was just 1%, so its an amazing change of behaviour.
The fastest growth in savings has been in term deposits, which the APRA estimates are up 21% in the past year.
The APRA figures show $422.4 billion was held in term deposits in October compared with $348bn last year.
That’s savings by individuals and company. The new black is caution and savings. If we save more, we spend less because we are not dashing out to put it on a credit card. No wonder retailers are moaning.
