Q3 GDP Could Be Stronger Than Q2, Domestic Demand Could Be Robust

Q3 GDP is published on Wednesday and Bloomberg consensus has been revised up 0.1pp to 0.5% q/q, slightly stronger than Q2’s 0.4%, but that would result in the annual rate moderating to 1.9% from 2.1%. While Q3 net exports look like they will make a larger-than-expected detraction, there is an upside risk from domestic demand and inventories. Given RBA concerns, there will be a particular focus on productivity and unit labour costs in the report.

• There are a range of projections between +0.1% and +1.0% q/q with most around 0.3-0.5%. CBA, NAB and Westpac are all at consensus but ANZ is below at 0.3% q/q.
• The Q3 data is pointing to another solid quarter of domestic demand growth. In Q1 and Q2 it rose 0.7% q/q. Q3 real retail sales rose 0.2% q/q, the first positive in a year. The ABS said that total public demand is expected to contribute 0.3pp to quarterly GDP growth, whereas net exports are likely to detract 0.6pp. Inventories posted an unexpected 1.2% q/q rise. Capex and construction both slowed but remained positive on the quarter.