I posted the Australian economic growth data for the April to June quarter and my response here:
And then the analyst response at Westpac:
More now, this time from CBA, in summary.
Their main points:
- Output of the Australian economy has lifted in line with an improving global economy and domestic labour market.
- Household consumption. pubic spending and net exports made positive contributions to growth.
- Business investment surprisingly declined while a fall in inventories was a drag on growth.
- Nominal GDP was down 0.1% in Q2 but sits at a buoyant 6.3% pa because commodity prices are higher through the year.
And, implications:
On the surface today's numbers are solid. The output side of the economy looks relatively healthy and in our view. we should see some further strength in real GDP growth over H2 2017.
- But there is more to the economy than just output.
- Weak household income growth (flat in Q2 and up just 0.2% pa) continues to weigh on the consumer.
- And flat real wages growth indicates that workers are not sharing the productivity dividend that is evident in positive GDP per capita growth.
- As a result. the disparity between consumer and business confidence is likely to persist.
Today's GDP result was right in line with the latest RBA forecasts (published in the August SoMP).
- As such, they don't shift the monetary policy dial.
- Especially as the inflation reads in today's data were uniformly Low.
- Rates will stay on hold until wages growth and core inflation are on a sustained upward trend.
- And while the recent data flow has been encouraging, we think that we are still some way off seeing a lift in economic activity flow through to firmer prices and wager.
- The next move in rates is up. But we don't think it arrives until 2018.
- As such. market pricing implying an 80% chance of a rate hike over the next year looks too ambitious. in our view
(bolding mine)
