Soft But Positive Q2 GDP Growth Expected

Q2 GDP is released on Wednesday and is forecast to post minimal growth of 0.2% q/q resulting in a the annual rate slowing to 0.9% from 1.1%, in line with the RBA’s August forecast. Growth is expected to be driven by public demand and net exports. While the Q2 data has come in soft, Q1 has been revised up for most of the partial data releases.

• Real retail sales contracted 0.3% q/q in Q2 and pointing to weak household consumption, but the latter includes services spending too, which may have remained positive especially for essential items. Government spending though looks like it was robust with the ABS saying that public consumption added 0.3pp and investment 0.1pp to growth.
• The Q2 private investment picture looked weak with capex down 2.2% q/q and construction volumes rising only 0.1% q/q. Inventories were muted rising only 0.1% q/q.
• The ABS said in the balance of payments release that net exports contributed 0.2 pp to Q2 growth, less than the 0.6pp forecast. Goods and services export volumes rose 0.5% q/q but have slowed considerably rising only 0.1% y/y after 7.5% y/y in Q2 2023. Imports fell 0.2% q/q but are running at a stronger annual rate of 5.2% y/y.
• GDP forecasts are concentrated around 0.2-0.3% q/q but range from 0% to 0.4% with ANZ at Bloomberg consensus and Westpac higher expecting 0.3%. Following this week’s partial Q2 data NAB has revised up its forecast by 0.2pp to 0.3% and CBA also 0.2pp to 0.4%.