Australia: Net exports jumps 0.3ppts in Q2, Public demand surges b 2.2%qtr - Westpac

Andrew Hanlan, Research Analyst at Westpac notes that Australia’s net exports have swung from a large negative in Q1 to a small positive in Q2.

Key Quotes

“The key theme, temporary disruptions dented export shipments in Q1, with a return to more normal conditions in Q2.”

“Net exports added 0.3ppts to Q2 GDP, exceeding expectations (mkt median 0.0 and Westpac 0.1ppt)”

“The subtraction from Q1 GDP was revised to -0.9ppts from -0.7ppts”

“Export volumes grew by 2.7% in Q2 vs a forecast 2.2%. Goods rebounded, +3.1% after a -3.0%, and services continue to grow at a relatively strong pace, +1.4% after a +1.3%, to be 5.4% above a year ago.”

“Import volumes advanced, +1.2% vs a forecast 1.9%, to meet expanding demand.”

“Public demand

• Public demand is expanding at an above trend pace as governments commit to new investment projects. This theme was evident in Q2.
• Public demand grew by 2.2% in the quarter, adding 0.5ppts to quarterly GDP. We had expected a contribution of 0.3ppts.
• Investment jumped 6.7% in the quarter and consumption increased by an above par 1.2%.”

“Implications for Q2 GDP

• We have upgraded our Q2 GDP growth forecast to 1.0%qtr, 2.0%yr, lifted from 0.7%qtr.
• The arithmetic is domestic demand 1.2%, inventories -0.6ppts and net exports +0.3ppts.”

“Key themes for Q2 are:

• activity rebounded with the return to more normal conditions following weather disruptions in Q1;
• a hiring burst, employment +0.9% and hours worked +1.2%, after an employment undershoot in 2016;
• consumers spent more freely in the period, a forecast 1.0%, with household incomes boosted by the lift in employment (albeit constrained by weak wages growth);
• an improved global back drop;
• positive trends around service export and public investment, as well as a modest lift in business investment;
• while home building was broadly flat, ahead of a downturn leading into 2018.”