Australia: Floods hamper GDP growth in Q1
June 1, 2011
In the first quarter, GDP expanded 1.0% over the same period the previous year, which marked a sharp moderation compared to the 2.7% expansion recorded in the fourth quarter and was in line with market analysts' expectations. According to the Australian Bureau of Statistics (ABS), the first quarter result was strongly affected by the Queensland floods, which began at the end of last year. Quarterly figures provide further evidence of the impact of the floods, as the economy contracted 1.2% quarter-on-quarter (Q4 2010: +0.8% qoq), marking the first negative reading in more than two years and the strongest contraction since the first quarter of 1991. The Q1 reading reflected a deterioration in the net contribution to growth of the external sector, as flooding affected production in key export sectors such as mining. Domestic demand (excluding inventories) improved, adding 3.3% annually, which was up from the 2.8% expansion seen in the fourth quarter. In particular, private consumption expanded 3.4%, up from the 3.0% increase recorded in the fourth quarter. Fixed investment also picked up, expanding 2.4% in Q1, which was an improvement compared to the 1.5% increase registered in the previous quarter. Exports contracted 3.4%, contrasting the 4.5% expansion recorded in the previous quarter and marking the worst result since Q2 2003, while imports rose 9.0%, mirroring the result seen in the previous quarter. As a result, the net contribution from the external sector to overall growth plunged from minus 1.0 percentage points in the fourth quarter to minus 2.8 percentage points. The Reserve Bank of Australia (RBA) currently expects the economy to grow 4.25% in 2011 and 3.75% in 2012.
Author: Armando Ciccarelli, Head of Data Solutions