In further news on economic growth, Australia’s GDP grew by just 0.5% in the June quarter, down sharply from the 1.1% recorded in the March quarter. The softening of Australia’s headline measure for growth in the economy was pronounced.
For the year to the end of March 2014, data shows the economy grew by an aggregate 3.5%. For the year ended June 2014, the economy had grown by just 3.1%, driven downwards by June quarter softness, as the chart from the dashboard shows.
The softening in GDP in the June Quarter may signal other concerns that will be important to note throughout the second half of 2014.
Examination of the individual elements that go to make up measures of economic growth provide mixed signals coming out of the June quarter.
This is especially the case for the build up of inventory across the economy in JQ’14. As the ABS said when the data was released:
“Changes in inventories contributed 0.9 percentage points to GDP growth. This was offset by a negative 0.9 percentage point contribution to growth from net exports.”
Inventory build up may have occurred because of weak sales and softening demand that could be reflected in consumption or export weakness in the next and subsequent quarters.
Equally plausible, as the table below shows, is that inventory build up in the June quarter may have been replaced from the March quarter, when it detracted from GDP by 0.6%. This was likely a result of net exports in that quarter contributing 1.0% to that quarter’s GDP growth.
Again, it is possible inventory was being established in the latter part of JQ’14 to fill built up and impending demand.
Its not possible at this time to pinpoint exactly what has been happening with inventory, but it’s a figure worth watching, as it may be a signal of future economic tidings, good or bad.
Contributions to GDP: 2013-14 (%)
|
Household Consumption |
Inventory |
Exports |
Imports |
Net Exports |
|
|
Sep-2013 |
0.4 |
-0.5 |
0.2 |
0.6 |
0.8 |
|
Dec-2013 |
0.4 |
0.3 |
0.2 |
0.1 |
0.3 |
|
Mar-2014 |
0.3 |
-0.6 |
1.0 |
0.2 |
1.2 |
|
Jun-2014 |
0.3 |
0.9 |
-0.2 |
-0.7 |
-0.9 |
|
Year-end |
1.4 |
0.1 |
1.2 |
0.2 |
1.4 |
Possibly coupled with concerns about a rapid build up in inventories is weak growth in private expenditure on capital equipment. Though it added 0.3% to growth for the quarter (the same as final consumption expenditure), as a signal of future expectations of growth in the Australian economy, it is a relatively soft result, down 0.9% compared with JQ’13.Source: ABS Cat No 5206 Table 2
Despite the underlying softness, on a year on year basis, there are some positive signs in Australia’s JQ’14 economic growth details.
Suppliers of building materials will be pleased that the contribution of New Dwellings has doubled to 0.4%, for instance. The rise is unsurprising when placed alongside the big lift (19.3%) in new residential housing approvals for the quarter, when compared with the same quarter in 2013.
Click here to go straight to the FWPA dashboard.
