Australia GDP grew only 0.2% qoq in Q4, slowed from prior quarter’s 0.3% qoq and missed expectation of 0.5% qoq. Annual growth slowed to 2.3%, down from Q3’s 2.7%. Looking at some details, terms of trade rose 3.2% qoq, 6.1% yoy. But consumer spending rose only 0.4% qoq, 2.0% yoy. Home building contracted -3.4% qoq, slowed to 2.5% yoy. Farm output dropped -4.0% qoq, -5.8% yoy. Full release here.
Australian Treasurer Josh Frydenberg tried to talk down the slowdown. He noted that “the moderation in part reflects the impact of the drought, lower mining investment and as we continue to move from the construction to the production phase, as well as a decline in residential construction activity from record levels”.
However, the country “continues to grow faster than any G7 nation except for the United States”. And, 0.2% growth was “within the range of market expectations” to him. Also, “over the past 12 months, more than 270,000 new jobs were created and more than 8 out of every 10 of these jobs were full-time.”
Westpac noted that the data now posts a “challenge” for RBA to “credibly maintain its GDP growth forecasts at 3% in 2019 and 2.75% in 2020”. Thus RBA is likely to revise down its growth forecasts in May SoMP. And the policy stance could then shift to steady with a clear easing bias. Westpac continued to expect RBA to cut twice this year in August and November.
