Australian economic growth likely slowed in Q2 in sequential terms

The Australian economic growth is likely to have slowed in the second quarter in sequential terms after growing strongly in the prior quarter. According to ANZ Research, the Australian GDP is estimated to have grown 0.3 percent quarter-on-quarter from a strong rise of 1.1 percent in the first quarter.

On year-on-year basis, the economy is expected to have expanded 3.2 percent as compared with 3.1 percent year-on-year in the first quarter. This would widely match the Reserve Bank of Australia’s rounded projection of 3.25 percent.

Even if the quarterly pace of growth is a decline from the first quarter, it majorly shows volatility in resources exports, rather than any trend slowdown in the wider economy. Together, growth in the first two quarters appears to have been a robust 2.8 percent annualized, according to ANZ.

Net exports appear to have negatively contributed 0.1 percentage point in the second quarter following a huge positive contribution of 1.1 percentage points in the previous quarter. Unseasonably favorable weather saw resources exports rise robustly in the first quarter, while a more modest expansion is expected for the second quarter. Meanwhile, imports are projected to have recovered in the second quarter.

Elsewhere, several key themes of the non-mining rebound are expected to be seen in the second quarter report. Housing continues to expand strongly, whereas consumer spending is expected to record a strong increase despite retail sales growth. Business investment continues to be subdued, with mining investment declining sharply as work on the huge LNG projects ends. Public demand is likely to have expanded at a comparatively stronger pace.

Meanwhile, profits are anticipated to have recovered. Company profits, underpinned by stronger commodity prices, are expected to have increased 2.5 percent. Wage bill growth is likely to be low due to modest employment growth and current weak wages growth.