Australia: December quarter GDP off to a feeble start - TDS

A surprise Dec trade deficit (-$A1.4b vs mkt +$A200m) via a substantial jump in goods imports (+7.6%/m, chart right) weighed on the AUD, according to Annette Beacher, Chief Asia-Pacific Macro Strategist at TDS.

Key Quotes

“Our flash forecast for the Dec qtr current account deficit is a widening from -2.3% to -2.8% of GDP, and net exports could detract up to -0.6%pts from Dec qtr GDP.”

“Exports remain firm: exports to China in Dec reached its third-highest level, and the 2017 trade surplus with China at $A36b was the second largest ever. Australia's trade surplus with Japan was not far behind at $A23b. Australia has a trade deficit with Europe and the U.S., which has been the case for decades.”

“Dec retail sales corrected as expected, but by a slightly larger -0.5%/m (mkt and TD -0.2%/m). Dec qtr sales volumes were solid at +0.9%/qtr, and we expect private consumption to add around +0.4%pts to Dec qtr GDP.”

“Bottom line: Dec qtr GDP off to a poor start, our tracking at +0.3%/qtr and 2.3%/yr. As good imports tend to appear as business investment, upcoming puzzle pieces are expected to upgrade our tracking (Dec qtr GDP released Mar 7).”