Australia: Growth strengthens in Q2
September 7, 2022
Economic activity increased 0.9% on a seasonally-adjusted quarter-on-quarter basis in Q2, following the previous quarter's 0.7% expansion. The result was in line with market expectations.
Private consumption expanded 2.2% in Q2, matching Q1’s result, due to strong increases in household spending on travel and hotels and restaurants and a declining savings-to-income ratio. However, fixed investment increased at a softer pace of 0.2% in Q2 from the 0.7% expansion recorded in the previous quarter. Fixed investment was suppressed by falling investment in dwellings, itself hindered by adverse weather conditions and protracted material and labor shortages. Meanwhile, government consumption contracted 0.8% in Q2 (Q1: +2.6% s.a. qoq).
On the external front, exports of goods and services jumped 5.5% in the second quarter (Q1: -0.8% s.a. qoq), supported by rising foreign sales of mineral ores, mineral fuels, rural goods and travel and transportation services. Meanwhile, imports of goods and services expanded 0.7% in Q2 (Q1: +11.3% s.a. qoq). Overall, net trade contributed 1.0 percentage points to the quarter-on-quarter expansion.
Meanwhile, in annual terms, GDP growth accelerated to 3.6% in the second quarter, from 3.3% in the first quarter.
Commenting on the release, Lee Sue Ann, economist at UOB, stated:
“The latest GDP prints continue to paint an overall positive backdrop for the Australian economy, following a rough start to the year. Our view remains for economic growth to turn softer towards Q4 2022 as high inflation and rapid increases in interest rates weigh on households alongside a slowdown in global growth.”
Meanwhile, Robert Carnell, analyst at ING, commented:
“There is likely to be a boost next quarter from inventory accumulation, given the drawdown apparent this quarter, so we may be in for another similar headline figure of around 1.0% QoQ in 3Q22. If so, that would put full-year 2022 GDP growth on track to exceed 4% — not really conducive to getting inflation down rapidly and might indicate that rates will have to go higher and stay higher for longer to achieve the RBA's aim.”