The March quarter GDP figures, due out in the latest national accounts later this morning, are shaping up to be better than expected – with some estimates as high as 1% for quarter on quarter growth.
That was after the better than expected current account figures which revealed net exports contributing a 1.1% boost to March quarter GDP, on top of the rise in wages and salaries and business inventories on Monday.
Net exports will make a much stronger contribution to GDP than they did in the December quarter when there was no boost at all
Economists had expected net exports to contribute 0.7 percentage points.The Australian dollar immediately reacted, surging about half a US cent to 72.30 US cents.
The better-than-expected result is likely to have pushed up the rate of quarterly growth beyond the 0.6% average estimate in a Bloomberg survey of economists. This would leave annual growth rise above the 2.7% forecast by economists and closer to the 3% level seen in the December quarter.
This is despite a weaker-than-expected contribution from corporate profits, which was offset with better inventories and higher salaries and wages.
Public sector demand and investment rose only modestly in the quarter, in line with expectations, unlike the solid contribution in the December quarter.
The ABS report showed the current account deficit narrowed to $A20.8 billion in the March quarter, down from a revised $A22.6 billion in the December quarter (previously $A21.1 billion).
As a result a number of economists have lifted their GDP estimates: Annette Beacher at TD Securities pushed up her March quarter GDP forecast by 0.2 percentage points to 0.8%-on-quarter ; JPMorgan has also lifted its GDP forecast by 0.2 percentage points, to 0.9%.; and Westpac’s Andrew Hanlan revised Westpac’s GDP forecast to 0.7% for the quarter from 0.6% previously, and now looks for year-on-year growth of 2.8%.
And other data out yesterday – namely private sector credit and building approvals – were also solid.
The Bureau of Statistics said building approvals rose 3% in April from March, the fastest since last December (and despite forecasts for a fall of 3%) month-on-month in April, the fastest rate rise since December and countering expectations of a 3% drop. March’s 3.7% rise was wound back to an increase of 2.9%.
Year-on-year they were up 0.7% (the first positive reading for 2016), versus expectations of a 6.7% fall.
Private sector lending – which encompasses home, personal and business loans – grew 6.7% in the year to April, ahead of estimates of 6.5% and a 6.4% rise in March.
That was the fastest growth since last October. Month-on-month it grew 0.5%, in line with expectations and compared to 0.4% in March. Mortgage lending to investors fell to 0.3% rise in April and 6.5% for the 12 months, the lowest annual rate since September 2013. Business lending jumped by an annual 6.7% in April, the fastest rate since early 2009.
In fact combined with other data such as the monthly NAB surveys of business conditions, modest growth in retail sales, building approvals turning positive in April and strong business lending, the economy is doing better than many believe.
