Australia’s fourth quarter GDP looks even stronger as trade surprises

Shipping containers are loaded onto trucks at a storage facility near Sydney Airport, Australia October 13, 2016. REUTERS/David Gray/Files

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  • Fourth quarter current account surplus narrows to A$12.7bn
  • Net exports reduce Q4 GDP by 0.2 ppt vs. -1 ppt forecast
  • Suggests an upside risk to the GDP forecast of +3% q/q

SYDNEY, March 1 (Reuters) – Australia’s trade performance in the last quarter was much less of a drag on the economy than previously thought, implying an upside risk to growth even as the imports exceeded exports and large dividends were paid abroad.

Data from the Australian Bureau of Statistics showed on Tuesday that the current account surplus narrowed to A$12.7 billion ($9.22 billion), from A$22 billion in the third quarter.

Still, net exports only slashed gross domestic product by 0.2 percentage points in the quarter, while analysts had expected a decline of 1.0 percentage points.

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Government spending was also a minor drag in the quarter, but that was more than offset by a sharp rise in business inventories, leaving analysts optimistic about growth. Read more

“Net exports weigh on growth in the fourth quarter much less than expected,” said Andrew Hanlan, senior economist at Westpac. “Our GDP forecast for the fourth quarter rises from 2.8% to 3.3% in the quarter.”

Fourth-quarter GDP figures are due on Wednesday and the median forecast was already calling for a strong 3% increase as consumer demand returns following the coronavirus lockdowns.

The rapid recovery shows all signs of a continued surge in retail sales in January and banks reporting healthy spending on their cards through February.

This resilience supports the Reserve Bank of Australia’s (RBA) upbeat outlook on growth as it holds its monthly policy meeting on Tuesday.

The central bank is considered certain to keep interest rates at 0.1% and reiterates that it will be patient on the hike while waiting for the much-desired recovery in wage growth.

RBA Governor Philip Lowe said it was plausible that a first rate hike could come later this year if the economy continues to recover, while markets are pricing in a move as early as July.

The Russian invasion of Ukraine added geopolitical uncertainty to the mix and combined with massive flooding in New South Wales and Queensland to darken the public mood.

An ANZ consumer survey released on Tuesday showed a sharp drop in sentiment last week, as inflation expectations hit a seven-year high of 5.3% as petrol prices hit record highs records.

Heat also appears to be coming out of the housing market with prices falling in Sydney in February for the first time in 17 months, although the move into the country continues at a brisk pace.

Figures from real estate consultant CoreLogic showed national house prices rose 0.6% in February, nearly half of the 1.1% jump seen in January. Values ​​in Sydney fell 0.1% and Melbourne was flat, hit by a rush in supply and higher mortgage rates. Read more

($1 = 1.3782 Australian dollars)

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Reporting by Wayne Cole; Editing by Kim Coghill and Sam Holmes

Our standards: The Thomson Reuters Trust Principles.

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