Australia: GDP Growth rebounded in Q1 2018 - NAB

Analysts at NAB note that Australia’s GDP Growth rebounded in Q1, supported by the household and government sectors and export growth as it rose to 1.0% q/q in real terms (Mkt: 0.9% q/q), while the year-ended rate of growth rose to 3.1% y/y.

Key Quotes

“Household consumption growth weakened in the quarter (+0.3% q/q) after recording a strong outcome in Q1. While the quarterly outcome was weaker than we expected, it is more in line with our assessment of the underlying rate of growth in household spending.”

“Investment continues to paint a picture of a handover to the non-mining sector – albeit with some volatility. In underlying terms (excluding transfers) business investment recorded meek growth of 0.1% q/q.”

“Government investment (in underlying terms) rose in the quarter after declining in Q1. Investment in public infrastructure projects is likely to be a key source of growth going forward, where we expect the government sector to support domestic demand much the same way as it did this quarter.”

“We believe this release will give comfort to the RBA, bringing the year-ended rate of growth in line with its latest forecasts for 2017/18. While growth appears relatively healthy, the weakness in household consumption is likely to remain a concern. Nonetheless, while this release does not change our view on the path of monetary policy (first increase mid-2019), there was some tentative evidence of a pick-up in wages growth, with average earnings growth rising to 0.5% in the quarter (and a small upward revision to the previous quarter). Combined with continued strength in employment, compensation of employees as a whole continues to grow at a relatively strong rate – a positive for wage earners as a whole.”