Australia’s economy slowed in the first quarter, constrained by weak net exports and a drop in housing investment. The currency jumped as annual growth beat expectations.

Key Points

Gross domestic product rose 0.3% from prior quarter; economists estimated 0.3% gain

Economy grew 1.7% from a year earlier, compared with a forecast 1.6% increase

Household savings ratio was 4.7%; household spending rose 0.5% q/q

Investment in total dwellings fell 4.4% in the quarter

Aussie dollar bought 75.39 U.S. cents at 11.53 a.m. in Sydney, compared with 75.03 cents before report

Big Picture

The Reserve Bank of Australia signaled Tuesday it would look through slower first-quarter growth when it left its benchmark rate on hold, saying it still expects the pace to accelerate above 3 percent in the next couple of years. Weakness in construction activity, retail sales and exports were all a restraint on growth in the three months, while public spending and strong company profits helped keep things moving.

Employment gains have been robust in the past couple of months, but record underemployment levels have prevented that feeding through to demands for higher pay. Meanwhile, recent surveys suggest some of the heat is finally starting to come out of the red-hot Sydney and Melbourne property markets.

Other Details

Biggest detractor from quarterly growth was exports, which cut 0.4 percentage point

Household consumption was driven by rises in rent and other dwelling services and electricity, gas and fuel

Largest rise in mining inventories since first quarter of 2012

Source:
courtesy of BLOOMBERG

by James Thornhill

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