Australia: GDP contracts in Q3
December 7, 2016
In the third quarter, GDP in Australia contracted a seasonally-adjusted 0.5% over the previous quarter, which contrasted both the 0.6% expansion in Q2 and the 0.3% expansion analysts had expected. The result marked the worst GDP reading since Q4 2008. On an annual basis, GDP growth deteriorated from 3.1% in Q2 to 1.8% in Q3, its slowest pace in seven years.
The contraction was broad-based, but domestic demand led the charge after having driven the expansion in Q2. Domestic demand swung from a 0.8% expansion in Q2 to a 0.5% contraction in Q3, its worst reading since Q1 2009. The drop was mainly due to fixed investment growth, which contracted 2.7% in Q3 following a mild expansion of 0.7% in Q2. Government consumption also contributed to the drop, as it fell 0.2% in Q3 after growing 2.0% in Q2. At the same time, private consumption continued to grow albeit at a slower pace (Q3: +0.4% quarter-on-quarter, Q2: +0.5% qoq).
On the external front, export growth slowed down dramatically, easing from 2.1% in Q2 to 0.3% in Q3.Imports growth also slowed, expanding 1.3% in Q3, after registering 2.9% in Q2. The resulting contribution of the external sector to overall growth was minus 0.2 percentage points, the lowest contribution in over a year (Q2: -0.1 percentage points).
Author: Christopher Mc Innes, Economist