Economy contracts – for the first time in 9 years – hit by the global pandemic.
The Australian economy contracted in the opening quarter of 2020 as the global pandemic caused significant disruptions, to international travel and then the broader economy over the final 2 weeks of the quarter as social distancing intensified and businesses closed.
Output contracted by 0.3%, broadly meeting expectations (Westpac and market median -0.4%). Annual growth slowed to 1.4%.
That is the first decline since March 2011 and with a sharp fall likely in the June quarter – this will be the first back to back falls since the first half of 1991.
Strikingly, hours worked fell by 0.9% in the March quarter in the National Accounts. That contrasts with the +0.2% in the monthly Labour Force survey.
The ABS has drawn upon the new weekly jobs series – it would seem – to give a more accurate reflection of conditions in the quarter – meeting our expectations. Recall that the monthly Labour Force survey is conducted in the first half of the month and so missed the sharp fall over the second half of March.
The Expenditure measure of GDP did contract, printing -0.2%.
The key downside surprise was a sharp 1.1% contraction in consumer spending. While retail rose, spending in other areas was hard hit by the pandemic.
Across the other areas of the economy, the key expenditure figures were largely as expected: home building down, business investment down as well, but public demand advancing. Net exports added to growth – but only because imports fell faster than the decline in exports – hence a bad news story. Inventories were a negative, reflecting an unintended run-down.
Details
- Real GDP: -0.3%qtr, 1.4 %yr
- Nominal GDP: 0.8%qtr, 3.1%yr
- Terms of trade: 2.9%qtr, -0.9%yr
- Hours worked: -0.9%qtr, 0.0%yr
- Domestic demand: -0.5%, 0.5%yr
- Inventories: -0.2ppts qtr
- Net exports: +0.5ppts qtr
- Consumer spending: -1.1%qtr, -0.2%yr
- Home building: -1.7%qtr, -9.7%yr
- Business investment: -0.8%qtr, -2.6%yr
- Public demand: 1.5%qtr, 5.4%yr
- Wage incomes: 0.5%qtr,4.2 %yr
- Wages (average earnings non-farm sector): -0.3%qtr, 2.0%yr
- Household consumption deflator: 0.5%qtr, 1.9%yr
- Household saving ratio: 5.5%, up from 3.5% in Q4
