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Australia’s gross domestic product (GDP) for the fourth quarter of last year is expected to have risen soft 0.2 percent q/q, following the 0.3 percent q/q rise in Q3 2018. This would see annual growth declining to 2.4 percent, according to the latest report from ANZ Research.
However, GDP growth at +0.2 percent q/q and +2.4 percent y/y, looks to be lower than the 2.8 percent annual growth the Reserve Bank of Australia (RBA) had forecast in its February Statement on Monetary Policy.
In tomorrow’s report, the focus will be on the household indicators – consumption and income. Weak retail sales volumes (+0.1 percent) point to relatively modest growth in consumer spending.
While retail spending accounts for only around 30 percent of total consumption, ongoing weakness in car sales, falling house prices and tighter credit conditions will all weigh on consumer spending.
The RBA will be firmly focussed on the household spending data in the GDP report. The central bank was surprised by the combination of downward revisions to past data and weakness in the Q3 report.
"If, as we expect, this weakness continued into Q4, the RBA may need to reassess its outlook once again. The Bank’s view, that stronger growth in household income will provide an offset to falling house prices, may also be tested, given that wage income (the largest component of household income) looks to have grown only modestly in Q4," the report added.
