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MNI BRIEF: Aussie Q4 GDP Disappoints With 0.5% Q/Q Growth

(MNI) Perth

The Reserve Bank of Australia will take comfort after Q4 GDP grew 0.5% q/q according to Australian Bureau of Statistics data released Wednesday, tracking in line with the bank's projections for slower growth and an eventual return to its inflation target.

The 2.7% y/y pace aligns with forecasts in the RBA's February Statement on Monetary Policy, which points to growth slowing to around 1.5% by the end of the year as the cumulative impact of 325bp of tightening - and more to come - weighs on aggregate demand. Markets had expected growth of 0.8% q/q. Growth slowed from 0.7% q/q and 5.9% y/y in Q3.

Household spending rose 0.3% in the quarter, contributing 0.2pp to GDP. The household saving to income ratio fell for the fifth consecutive quarter from 7.1% to 4.5%. Net trade contributed 1.1pp to GDP as exports increased 1.1% and imports fell 4.3%. Inventories detracted 0.5pp from GDP growth.

The GDP data also highlighted elevated price pressures. The GDP Implicit price deflator rose 1.6% q/q in Q4 and 9.1% y/y. Domestic prices rose strongly, up 1.4% q/q and 6.6% y/y - the strongest year-on-year rise in domestic prices since the Q1 1990. January CPI data, released on Wednesday, showed inflation eased to 7.4% y/y from 8.4% y/y in December. (See MNI BRIEF: Aussie CPI Eases to 7.4% In Jan). The Australian dollar fell after the data. (See AUD : AUD/USD Targeting Break Of 0.6700 Post Data Misses)

Robert covers RBA and RBNZ policy and the economy for MNI in Australia.
Robert covers RBA and RBNZ policy and the economy for MNI in Australia.

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