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Australia: Q3 GDP forecasted at 0.8% - Westpac

Andrew Hanlan, Research Analyst at Westpac, suggests that the Australia’s net exports and public demand figures are neutral for activity in Q3 and they forecast Q3 GDP to print 0.8%qtr.

Key Quotes

Net exports

  • Net exports are neutral for activity in the third quarter, representing a downside surprise (mkt median f/c +0.25ppts & Westpac f/c 0.2ppts).
  • Imports grew by 1.9%, meeting our expectations. Goods +1.8% and services +2.2% both expanded to meet rising demand, including a lift in business investment.
  • Over the past year, imports increased by a robust 7.7%, with matching strength in goods and services.
  • Exports fell short of expectations, +1.9% vs a forecast 3%. Although, history was revised higher, with Q2 upgraded from 2.7%qtr, 4.3%yr to 3.3%qtr, 5.3%yr.
  • Exports have resumed their upward trend following a dip in Q1 associated with weather disruptions, led higher by resources and services.
  • Over the past year, export volumes increased by 6.4%, with services up a brisk +9.7% and goods some 5.4% higher.”

Public demand

  • Public demand is expanding at an above trend pace, with an upswing in investment underway, up from the lows of a couple of years ago.
  • In Q3, public demand surprised to the upside, offsetting the disappointment on net exports.
  • Public demand increased by 1.2% in the quarter, including a stellar 5.5% jump in investment, exceeding our forecast of 0.6%.”

Implications for Q3 GDP

  • Our forecast for Q3 GDP growth remains 0.8%qtr, 3.1%yr.
  • The arithmetic is domestic demand 0.5%, inventories +0.2ppts, net exports 0.0ppt, and the statistical discrepancy +0.1ppts

(note, we expect the income measure of GDP to be a fraction firmer than the expenditure estimate)”

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