Trade data suggests a good Q2 GDP report

Government accounts and balance of payments for Q2 were published today. The ABS estimates that government spending should contribute 0.1 percentage point to second quarter GDP and net exports of goods and services 1pp. With all partials for Q2 GDP now released, there is a risk that GDP prints higher than expected. All components, except investment, are likely to make positive contributions. At this stage, the market consensus is +1.0% for q/q growth and +3.5% y/y (in Q1 we saw 0.8% q/q and a 3.3% y/y pace).

• The Q2 current account balance posted its 13^th consecutive surplus at $18.3bn rising $15.6bn q/q. This is the longest stretch of surpluses on record. The ABS noted that the increase was driven by the impact of higher commodity prices on the goods balance while the services balance deteriorated slightly.
• Export volumes were also strong rising 5.5%q/q due to increased demand for commodities and for travel-related services. Import volumes rose 0.7%, as Australians travelled overseas again.
• The terms of trade rose a further 4.6% in Q2 to be up 7.5% y/y. While the AUD has diverged from the terms of trade this year, it continues to drive valuation estimates higher. This coupled with the strong current account surplus is providing some support to the currency.