Latest data highlights economic resilience
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IMPORTANT INFORMATION AND DISCLAIMER FOR RETAIL CLIENTS The Economic Insights Series provides general market-related commentary on Australian macroeconomic themes that have been selected for coverage by the Commonwealth Securities Limited (CommSec) Chief Economist. Economic Insights are not intended to be investment research reports. This report has been prepared without taking into account your objectives, financial situation or needs. It is not to be construed as a solicitation or an offer to buy or sell any securities or financial instruments, or as a recommendation and/or investment advice. Before acting on the information in this report, you should consider the appropriateness and suitability of the information, having regard to your own objectives, financial situation and needs and, if necessary, seek appropriate professional of financial advice. CommSec believes that the information in this report is correct and any opinions, conclusions or recommendations are reasonably held or made based on information available at the time of its compilation, but no representation or warranty is made as to the accuracy, reliability or completeness of any statements made in this report. Any opinions, conclusions or recommendations set forth in this report are subject to change without notice and may differ or be contrary to the opinions, conclusions or recommendations expressed by any other member of the Commonwealth Bank of Australia group of companies. CommSec is under no obligation to, and does not, update or keep current the information contained in this report. Neither Commonwealth Bank of Australia nor any of its affiliates or subsidiaries accepts liability for loss or damage arising out of the use of all or any part of this report. All material presented in this report, unless specifically indicated otherwise, is under copyright of CommSec. This report is approved and distributed in Australia by Commonwealth Securities Limited ABN 60 067 254 399, a wholly owned but not guaranteed subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124. This report is not directed to, nor intended for distribution to or use by, any person or entity who is a citizen or resident of, or located in, any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or that would subject any entity within the Commonwealth Bank group of companies to any registration or licensing requirement within such jurisdiction. Economics | December 1, 2021 Latest data highlights economic resilience National Accounts The Australian economy (as measured by gross domestic product or GDP) contracted by 1.9 per cent in the September quarter, reflecting lockdowns (survey: -2.9 per cent). The economy is up 3.9 per cent on the year. In nominal terms, the economy fell 0.6 per cent in the September quarter but was 11.2 per cent up on the year. The biggest contribution to the contraction in the economy was household spending (-2.5 percentage points), followed by inventories (-1.3pp). Net exports added 1.0pp to growth with government consumption adding 0.8pp and commercial building adding 0.2pp. The household saving rate jumped from 11.8 per cent to 19.8 per cent with household gross disposable income up 4.6 per cent – the strongest pace in 13 years. What does it mean? The National Accounts publication is the most comprehensive measure of Australia’s economic performance including economy-wide output and spending. But it is somewhat dated – with more up-to-date indicators (covering November) also released today. And in the Covid-19 world, that is important. Because the September quarter was dominated by lockdowns across Australia, especially in the south-east. So it is understandable that the economy contracted by 1.9 per cent in the quarter – the second biggest contraction in 47 years. But state and territory economies came out of lockdowns from mid-October. Over November, Aussies embraced the new freedoms such as shopping at ‘bricks and mortar’ stores at the Black Friday sales – putting forced savings to work. So it shouldn’t surprise if the economy rebounds in the December quarter by a similar or bigger magnitude as the September quarter contraction. The September quarter economic contraction was smaller-than-forecast by economists, suggesting an encouraging economic resilience, especially compared to last year’s initial national lockdown in the June quarter. And the annual pace of economic growth at 3.9 per cent was above the pre-pandemic pace of around 2 per cent. Today’s report also served to highlight the importance of government fiscal support during lockdowns with public demand stemming the slump in economic activity. The challenge continues to be ‘Living with Covid’ (See our Big Issues of 2022 report) here: https://www.commsec.com.au/content/dam/EN/Rese archNews/2021Reports/November/ECO_Insights_241
Transcript of Latest data highlights economic resilience
ECO_Insights_011221-Latest-data-highlights-economic-resilience.pdfThe
Economic Insights Series provides general market-related commentary
on Australian macroeconomic themes that have been selected for
coverage by the Commonwealth Securities Limited (CommSec) Chief
Economist. Economic Insights are not intended to be investment
research reports.
This report has been prepared without taking into account your objectives, financial situation or needs. It is not to be construed as a solicitation or an offer to buy or sell any securities or financial instruments, or as a recommendation and/or investment advice. Before acting on the information in this report, you should consider the appropriateness and suitability of the information, having regard to your own objectives, financial situation and needs and, if necessary, seek appropriate professional of financial advice.
CommSec believes that the information in this report is correct and any opinions, conclusions or recommendations are reasonably held or made based on information available at the time of its compilation, but no representation or warranty is made as to the accuracy, reliability or completeness of any statements made in this report. Any opinions, conclusions or recommendations set forth in this report are subject to change without notice and may differ or be contrary to the opinions, conclusions or recommendations expressed by any other member of the Commonwealth Bank of Australia group of companies.
CommSec is under no obligation to, and does not, update or keep current the information contained in this report. Neither Commonwealth Bank of Australia nor any of its affiliates or subsidiaries accepts liability for loss or damage arising out of the use of all or any part of this report. All material presented in this report, unless specifically indicated otherwise, is under copyright of CommSec.
This report is approved and distributed in Australia by Commonwealth Securities Limited ABN 60 067 254 399, a wholly owned but not guaranteed subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124. This report is not directed to, nor intended for distribution to or use by, any person or entity who is a citizen or resident of, or located in, any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or that would subject any entity within the Commonwealth Bank group of companies to any registration or licensing requirement within such jurisdiction.
Economics | December 1, 2021
Latest data highlights economic resilience National Accounts
The Australian economy (as measured by gross domestic product or GDP) contracted by 1.9 per cent in the September quarter, reflecting lockdowns (survey: -2.9 per cent). The economy is up 3.9 per cent on the year.
In nominal terms, the economy fell 0.6 per cent in the September quarter but was 11.2 per cent up on the year.
The biggest contribution to the contraction in the economy was household spending (-2.5 percentage points), followed by inventories (-1.3pp). Net exports added 1.0pp to growth with government consumption adding 0.8pp and commercial building adding 0.2pp.
The household saving rate jumped from 11.8 per cent to 19.8 per cent with household gross disposable income up 4.6 per cent – the strongest pace in 13 years.
What does it mean?
The National Accounts publication is the most comprehensive measure of Australia’s economic performance including economy-wide output and spending. But it is somewhat dated – with more up-to-date indicators (covering November) also released today. And in the Covid-19 world, that is important.
Because the September quarter was dominated by lockdowns across Australia, especially in the south-east. So it is understandable that the economy contracted by 1.9 per cent in the quarter – the second biggest contraction in 47 years.
But state and territory economies came out of lockdowns from mid-October. Over November, Aussies embraced the new freedoms such as shopping at ‘bricks and mortar’ stores at the Black Friday sales – putting forced savings to work. So it shouldn’t surprise if the economy rebounds in the December quarter by a similar or bigger magnitude as the September quarter contraction.
The September quarter economic contraction was smaller-than-forecast by economists, suggesting an encouraging economic resilience, especially compared to last year’s initial national lockdown in the June quarter. And the annual pace of economic growth at 3.9 per cent was above the pre-pandemic pace of around 2 per cent.
Today’s report also served to highlight the importance of government fiscal support during lockdowns with public demand stemming the slump in economic activity.
The challenge continues to be ‘Living with Covid’ (See our Big Issues of 2022 report) here: https://www.commsec.com.au/content/dam/EN/Rese archNews/2021Reports/November/ECO_Insights_241
Economic Insights: Latest data highlights economic resilience
December 1, 2021 | 2
121-The-Big-Issues-of-2022.pdf ). This includes responding to new variants such as Omicron. Governments stress that lockdowns are a thing of the past, although that doesn’t mean that border restrictions won’t change from time-to-time as we are seeing now.
Commonwealth Bank (CBA) Group economists expect the Australian economy to grow 3.5 per cent in the current 2021 calendar year before growing 4.4 per cent in 2022. Home building, household spending, private business investment and infrastructure spending will all drive the Australian economy over 2022. Some dollars may be diverted from domestic consumer spending to overseas travel, but that is far from certain.
Rate hikes could begin in November 2022 in response to higher rates of inflation and a tighter job market, including firmer wage growth.
Today’s data has no implications for the sharemarket. It is just important to be aware of the context of the economic contraction and expected rebound.
What do you need to know? Economic Growth: The Australian economy (as measured by gross domestic product or GDP) contracted by 1.9 per
cent in the September quarter after rising 0.7 per cent in the June quarter. The economy grew by 3.9 per cent in the year to September. Growth has averaged 2.3 per cent over the decade
and growth averaged 2.5 per cent over the last 15 years. As at September 2022, the Australian economy was valued at $2,122.2 billion. The non-farm economy fell by 2.0 per cent in the September quarter after growing by 0.6 per cent in the June
quarter. Non-farm GDP is up 3.2 per cent over the year. Farm GDP rose by 0.3 per cent in the September quarter to be up by 43.4 per cent over the year – just off the fastest
growth in 17 years. At current prices, GDP fell by 0.6 per cent in the September quarter after rising by 3.3 per cent in the June quarter.
Nominal GDP grew by 11.2 per cent on the year (decade average +4.0 per cent). Incomes: Overall incomes fell by 0.6 per cent in the September quarter. Corporate profits rose by 4.7 per cent with the
wage bill up 0.5 per cent and taxes down by 27.6 per cent. GDP per capita fell by 2.0 per cent in the September quarter but was up 3.5 per cent on the year. Contribution to the overall result: The biggest contribution to the contraction in the economy was household
spending (-2.5 percentage points), followed by inventories (-1.3pp), business equipment spending and public investment (both -0.1pp). Net exports added 1.0pp to growth followed by government consumption (+0.8pp), commercial building (+0.2pp) and ownership transfer costs (+0.1pp).
Inflation & wages: In terms of domestic price pressures, the household consumption implicit price deflator rose by 0.3 per cent in the September quarter. Annual growth lifted from 1.7 per cent to 1.8 per cent. Real non-farm unit labour costs rose by 0.3 per cent in the September quarter to be up 7.8 per cent over the year.
Household savings ratio. The household saving ratio rose from 11.8 per cent in the June quarter to 19.8 per cent in the September quarter.
The terms of trade rose by 0.4 per cent in the September quarter to record highs and was up 23.1 per cent on the year.
Economic Insights: Latest data highlights economic resilience
December 1, 2021 | 3
Productivity and output measures: GDP per hours worked rose by 3.7 per cent in the September quarter to be up 1.7 per cent on the year. Gross value added per hours worked in the market sector fell by 1.9 per cent in the quarter to be up 4.7 per cent on the year.
States & Territories: The only data available is state final demand (more accurate data would include net exports but it is not available for all states and territories). State final demand in the September quarter: NSW (down 6.5 per cent); Victoria (down 1.4 per cent); Queensland (up 1.8 per cent); South Australia (up 1.4 per cent); Western Australia (up 0.6 per cent); Tasmania (up 4.2 per cent); Northern Territory (up 4.0 per cent); and the ACT (down 1.6 per cent).
Consumer spending: Household spending fell by 4.8 per cent in the September quarter to be down 2.5 per cent for the year.
Industry sectors: Thirteen of the 19 industry sectors contracted in the September quarter. The biggest contribution to the overall decrease in output came from Accommodation and Food Services (-0.5 percentage points); Wholesale trade, Health care and social assistance and Other services (all -0.2pp). Seven other sectors trimmed 0.1pp from to growth.
In percentage terms the biggest fall in the quarter was in Accommodation and Food Services (down 26.4 per cent), ahead of Other services (down 11.8 per cent).
Craig James, Chief Economist Twitter: @CommSec
This report has been prepared without taking into account your objectives, financial situation or needs. It is not to be construed as a solicitation or an offer to buy or sell any securities or financial instruments, or as a recommendation and/or investment advice. Before acting on the information in this report, you should consider the appropriateness and suitability of the information, having regard to your own objectives, financial situation and needs and, if necessary, seek appropriate professional of financial advice.
CommSec believes that the information in this report is correct and any opinions, conclusions or recommendations are reasonably held or made based on information available at the time of its compilation, but no representation or warranty is made as to the accuracy, reliability or completeness of any statements made in this report. Any opinions, conclusions or recommendations set forth in this report are subject to change without notice and may differ or be contrary to the opinions, conclusions or recommendations expressed by any other member of the Commonwealth Bank of Australia group of companies.
CommSec is under no obligation to, and does not, update or keep current the information contained in this report. Neither Commonwealth Bank of Australia nor any of its affiliates or subsidiaries accepts liability for loss or damage arising out of the use of all or any part of this report. All material presented in this report, unless specifically indicated otherwise, is under copyright of CommSec.
This report is approved and distributed in Australia by Commonwealth Securities Limited ABN 60 067 254 399, a wholly owned but not guaranteed subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124. This report is not directed to, nor intended for distribution to or use by, any person or entity who is a citizen or resident of, or located in, any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or that would subject any entity within the Commonwealth Bank group of companies to any registration or licensing requirement within such jurisdiction.
Economics | December 1, 2021
Latest data highlights economic resilience National Accounts
The Australian economy (as measured by gross domestic product or GDP) contracted by 1.9 per cent in the September quarter, reflecting lockdowns (survey: -2.9 per cent). The economy is up 3.9 per cent on the year.
In nominal terms, the economy fell 0.6 per cent in the September quarter but was 11.2 per cent up on the year.
The biggest contribution to the contraction in the economy was household spending (-2.5 percentage points), followed by inventories (-1.3pp). Net exports added 1.0pp to growth with government consumption adding 0.8pp and commercial building adding 0.2pp.
The household saving rate jumped from 11.8 per cent to 19.8 per cent with household gross disposable income up 4.6 per cent – the strongest pace in 13 years.
What does it mean?
The National Accounts publication is the most comprehensive measure of Australia’s economic performance including economy-wide output and spending. But it is somewhat dated – with more up-to-date indicators (covering November) also released today. And in the Covid-19 world, that is important.
Because the September quarter was dominated by lockdowns across Australia, especially in the south-east. So it is understandable that the economy contracted by 1.9 per cent in the quarter – the second biggest contraction in 47 years.
But state and territory economies came out of lockdowns from mid-October. Over November, Aussies embraced the new freedoms such as shopping at ‘bricks and mortar’ stores at the Black Friday sales – putting forced savings to work. So it shouldn’t surprise if the economy rebounds in the December quarter by a similar or bigger magnitude as the September quarter contraction.
The September quarter economic contraction was smaller-than-forecast by economists, suggesting an encouraging economic resilience, especially compared to last year’s initial national lockdown in the June quarter. And the annual pace of economic growth at 3.9 per cent was above the pre-pandemic pace of around 2 per cent.
Today’s report also served to highlight the importance of government fiscal support during lockdowns with public demand stemming the slump in economic activity.
The challenge continues to be ‘Living with Covid’ (See our Big Issues of 2022 report) here: https://www.commsec.com.au/content/dam/EN/Rese archNews/2021Reports/November/ECO_Insights_241
Economic Insights: Latest data highlights economic resilience
December 1, 2021 | 2
121-The-Big-Issues-of-2022.pdf ). This includes responding to new variants such as Omicron. Governments stress that lockdowns are a thing of the past, although that doesn’t mean that border restrictions won’t change from time-to-time as we are seeing now.
Commonwealth Bank (CBA) Group economists expect the Australian economy to grow 3.5 per cent in the current 2021 calendar year before growing 4.4 per cent in 2022. Home building, household spending, private business investment and infrastructure spending will all drive the Australian economy over 2022. Some dollars may be diverted from domestic consumer spending to overseas travel, but that is far from certain.
Rate hikes could begin in November 2022 in response to higher rates of inflation and a tighter job market, including firmer wage growth.
Today’s data has no implications for the sharemarket. It is just important to be aware of the context of the economic contraction and expected rebound.
What do you need to know? Economic Growth: The Australian economy (as measured by gross domestic product or GDP) contracted by 1.9 per
cent in the September quarter after rising 0.7 per cent in the June quarter. The economy grew by 3.9 per cent in the year to September. Growth has averaged 2.3 per cent over the decade
and growth averaged 2.5 per cent over the last 15 years. As at September 2022, the Australian economy was valued at $2,122.2 billion. The non-farm economy fell by 2.0 per cent in the September quarter after growing by 0.6 per cent in the June
quarter. Non-farm GDP is up 3.2 per cent over the year. Farm GDP rose by 0.3 per cent in the September quarter to be up by 43.4 per cent over the year – just off the fastest
growth in 17 years. At current prices, GDP fell by 0.6 per cent in the September quarter after rising by 3.3 per cent in the June quarter.
Nominal GDP grew by 11.2 per cent on the year (decade average +4.0 per cent). Incomes: Overall incomes fell by 0.6 per cent in the September quarter. Corporate profits rose by 4.7 per cent with the
wage bill up 0.5 per cent and taxes down by 27.6 per cent. GDP per capita fell by 2.0 per cent in the September quarter but was up 3.5 per cent on the year. Contribution to the overall result: The biggest contribution to the contraction in the economy was household
spending (-2.5 percentage points), followed by inventories (-1.3pp), business equipment spending and public investment (both -0.1pp). Net exports added 1.0pp to growth followed by government consumption (+0.8pp), commercial building (+0.2pp) and ownership transfer costs (+0.1pp).
Inflation & wages: In terms of domestic price pressures, the household consumption implicit price deflator rose by 0.3 per cent in the September quarter. Annual growth lifted from 1.7 per cent to 1.8 per cent. Real non-farm unit labour costs rose by 0.3 per cent in the September quarter to be up 7.8 per cent over the year.
Household savings ratio. The household saving ratio rose from 11.8 per cent in the June quarter to 19.8 per cent in the September quarter.
The terms of trade rose by 0.4 per cent in the September quarter to record highs and was up 23.1 per cent on the year.
Economic Insights: Latest data highlights economic resilience
December 1, 2021 | 3
Productivity and output measures: GDP per hours worked rose by 3.7 per cent in the September quarter to be up 1.7 per cent on the year. Gross value added per hours worked in the market sector fell by 1.9 per cent in the quarter to be up 4.7 per cent on the year.
States & Territories: The only data available is state final demand (more accurate data would include net exports but it is not available for all states and territories). State final demand in the September quarter: NSW (down 6.5 per cent); Victoria (down 1.4 per cent); Queensland (up 1.8 per cent); South Australia (up 1.4 per cent); Western Australia (up 0.6 per cent); Tasmania (up 4.2 per cent); Northern Territory (up 4.0 per cent); and the ACT (down 1.6 per cent).
Consumer spending: Household spending fell by 4.8 per cent in the September quarter to be down 2.5 per cent for the year.
Industry sectors: Thirteen of the 19 industry sectors contracted in the September quarter. The biggest contribution to the overall decrease in output came from Accommodation and Food Services (-0.5 percentage points); Wholesale trade, Health care and social assistance and Other services (all -0.2pp). Seven other sectors trimmed 0.1pp from to growth.
In percentage terms the biggest fall in the quarter was in Accommodation and Food Services (down 26.4 per cent), ahead of Other services (down 11.8 per cent).
Craig James, Chief Economist Twitter: @CommSec
