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According to data released by the Australian Bureau of Statistics, Australia’s economy grew at a slower pace than forecast in the three months to the end of September. Australia’s Q3 GDP rose a modest 0.6 percent q/q, slowing from the upwardly revised 0.9 percent in Q2. Data missed market expectations for a 0.7 percent q/q. Annual growth accelerated to 2.8 percent, also below expectations at 3.0 percent.
Details of the report showed that 17 out of 20 industries recorded growth in the third quarter led by professional, scientific and technical services. The contribution to growth from exports was flat. Household consumption growth grew a meagre 0.1 percent q/q, the weakest since 2008. Non-dwelling investment was the biggest contributor to growth, with both public and private sector rising. Underlying business investment was up 2 percent q/q extending gains for four quarters in a row. And the forward indicators suggest investment will remain solid.
On an encouraging note, compensation of employees was up 1.2 percent q/q to be up 3 percent y/y. The GDP measure of wages was up 0.5 percent q/q, up from 0.2 percent q/q in Q2. Unit labour costs rose 0.5 percent y/y in the quarter (on a hours basis), down from the revised 1.4 percent y/y gain in Q2. Household saving rate ticked up in the quarter which might be some encouragement for policymakers.
"The result highlights the disparate influences on the economy at present, with household spending under pressure but investment strong. We are encouraged by the rise in wages, but it needs to be backed up by the Wage Price Index to impact on RBA policy expectations for 2018," said ANZ in a report.
Aussie dumped on Australia GDP miss, AUD/USD retraces from session highs at 0.7630. The pair has erased hawkish RBA led gains and retraced break above 20-DMA. 100W SMA at 0.7552 is strong support ahead of major trendline at 0.7535. We see bullish invalidation on break below 0.7535. Break above 50W SMA at 0.7662 finds next major resistance at 200-DMA at 0.7690. Further upside on break above.
"We continue to forecast no RBA rate hike by end-2018. Today’s data also help reinforce our expectation that relative AUD underperformance will continue in 2018, driven by: 1) the ongoing monetary policy divergence between a patient RBA and other major central banks; and 2) the bias for a lower Australian terms of-trade," said Nomura in a report.
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