Output expanded by 0.9% in the June quarter, meeting market expectations. Consumer spending was a bright spot, up 2.2% (albeit falling short of our expectations). Exports also performed well. However, elsewhere conditions were mixed.
The Australian economy expanded by 0.9% in the June quarter.
That met market expectations, market median 0.9% and Westpac 1.1%.
Annual growth is 3.6%. The level of activity is 5.5% above levels prior to the pandemic, at the end of 2019.
Consumer spending was a bright spot in the quarter (albeit not quite as strong as we anticipated), so too were exports. Elsewhere, conditions were mixed – construction work was down, public demand was flat (representing a consolidation) and inventories were a sizeable drag.
GDP, three measures:Â the GDP headline is an average of three measures: expenditure, income and production. GDP (E) printed at 0.8% qtr, GDP (I) 0.8% and GDP (P) was 1.1%.
Hours worked: The National Accounts estimate that hours worked expanded by 2.9% – a strong result, but well below the brisk 4.6% reported in the Labour Force Survey.
State demand: NSW led the way, with state final demand expanding by 1.9%. WA consolidated, at only +0.1%, while Victoria and Qld grew at 1.0%, in line with the national figure for domestic demand.
Key surprises: A key upside surprise was consumer spending – a gain of 2.2%, falling short of our expected 2.8%.
Note that the 2.2% gain matches that in Q1 (revised up from 1.5% previously) a period impacted by the omicron wave and wet weather / flooding.
The easing of restrictions and reopening of external borders saw another strong rise in services spend, albeit not quite as strong as anticipated.
The ABS report that, spending on services increased 3.6%, exceeding pre-pandemic levels for the first time. The easing of travel restrictions accelerated spending on transport and other related services. Hotels, cafes and restaurants (+8.8%), transport services (+37.3%) and recreation and culture (+3.6%) all contributed to the rise.
Spending on goods decreased 0.1%, as heightened demand during the onset of the pandemic began to stabilise.
Around incomes, disposable incomes rose 1%qtr, in line with expectations, supported by a solid rise in wage incomes.
The mix saw the household savings ratio decline from 11.1% to 8.7% – a slightly smaller decline than we had pencilled in.
Expenditure detail:
Home building activity declined, down by 2.9% (somewhat less than the partials suggested), impacted by wet weather and supply headwinds (shortages of labour and materials), as well the cost pressures faced by builders.
Business investment increased by 0.6% (as expected), with a decline in construction (infrastructure -3.9% and non-residential building -0.3%) partially offsetting a rise in equipment spending, +3.9%.
Public demand was flat in the quarter, consolidating after a well above par result in Q1 (inflated by a spike in covid vaccine supplies).
Net exports made a sizeable positive contribution to growth, +1.0ppt, albeit only a partial offset to the drag over the past year. Exports, which have struggled during the pandemic, had a strong quarter, +5.5%, while imports consolidated, +0.7%, after a surge in Q1.
Total inventories subtracted -1.2ppts from activity, centred on private business non-farm inventories at -1.1ppts.
