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Australia GDP Q3 2022

Australia: Growth softens but surprises on the upside in Q3

Economic activity increased 0.6% on a seasonally adjusted quarter-on-quarter basis in Q3, following the previous quarter’s 0.9% expansion. The result beat market expectations.

Private consumption expanded 1.1% in Q3, following Q2s 2.1% jump. The deceleration followed a strong rebound in the previous quarter, and household spending remained robust, supported by a further easing in Covid-19 restrictions and a declining savings-to-income ratio. Meanwhile, fixed investment dipped 0.2% in Q3, swinging from the 0.5% expansion recorded in the previous quarter. Fixed investment was suppressed by falling private investment in machinery and equipment and declining public investment. Meanwhile, government consumption rose 0.1% in Q3 (Q2: -0.7% s.a. qoq).

On the external front, exports of goods and services increased 2.7% in the third quarter (Q2: +5.3% s.a. qoq), supported by a recovering tourism sector but weighed down by foreign sales of non-rural goods, which were hit by adverse weather conditions. Meanwhile, imports of goods and services rose 3.9% in Q3 (Q2: +1.4% s.a. qoq). Overall, net trade subtracted 0.2 percentage points from the quarter-on-quarter expansion, swinging from Q2s 0.8 percentage point contribution.

Meanwhile, in annual terms, GDP growth accelerated to 5.9% in the third quarter from 3.2% in the second quarter.

As for the last quarter of the year, available data suggests momentum could be cooling further. Declining business confidence in October, falling consumer sentiment in October-November and a further increase in interest rates bode poorly for activity. Next year, economic growth should move into a lower gear. Household spending will lose steam amid declining savings and still-elevated inflation. Volatile energy prices and a sharper-than-expected global slowdown pose downside risks.

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