Australian economic growth likely to have remained flat sequentially in Q3, says ANZ

The Australian economy is expected to have recorded a flat growth on a sequential basis in the third quarter, according to an ANZ research report. This follows a strong sequential growth of 0.5 percent in the second quarter. The year-on-year growth is expected to have slowed to 2.3 percent in the September quarter from 3.3 percent in the prior quarter. This would be quite below the central bank’s implied projections of around 3 percent.

The subdued GDP reading appears to be quite widespread, although business investment appears to have been pretty weak, taking around 0.6 percentage point off GDP growth in the quarter. Certain deceleration in GDP growth might not be unexpected given the apparent loss of momentum in the labor market, stated ANZ.

Several of the recent partial indicators have come in low. The decline in housing construction in the third quarter was a surprise given the level of approvals, while non-residential building also came in much lower than anticipated.

The decline in engineering construction continues to be in line with the ongoing downturn in mining; however, the weakness in equipment investment was at odds with strong import growth. Household consumption also appears to have recorded just moderate gains. Furthermore, net exports appear to have been a slight drag on growth. Meanwhile, public demand is expected to have growth strongly.

On the income front, strong growth in profits is likely, with mining sector profits underpinned by the solid increase in commodity prices. This would be partially countered by only modest growth in the wages bill given the weak employment growth and ongoing weak wages growth, added ANZ.