The Australian economy slowed in the 4th quarter of 2012 and while the growth rate for the economy of 0.4% will grab the headlines, some of the details will raise eyebrows, especially a reasonable contribution from the supposedly moribund manufacturing sector.
The ABS growth figures confirm the rate decisions on February and yesterday by the RBA and the assessment of the economy in the post-meeting comments by Governor Glenn Stevens.
And for those analysts who are already grabbing the figures to justify a rate cut or two this year, remember that rates were cut twice towards the end of the December quarter and the impact has yet to show up in the level of activity.
A solid contribution from consumption and inventories, plus exports, helped drive the modest increase in gross domestic product, but more surprising was the positive contributions from manufacturing and financial services, both of which have seen job losses, business cutbacks and falling levels of demand.
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The Australian Bureau of Statistics said the rise in December came after a downwardly revised rise of 0.8% in the September quarter (1% originally reported last December).
That gave a growth figure for the year of 2.3%, down a bit on most forecasts, as was the quarter on quarter increase market forecast which was around 0.8%. The annual growth rate for the 12 months to September was 2.6%.
That growth figure for 2011 contains the fall of 0.9% in the March quarter caused by the terrible floods in Queensland, and then cyclone Yasi, which helped send inflation higher. Looked at another way, the economy survived a huge supply side knock to regain its trend growth line as the year went on and finished faster than it started in the March quarter.
The ABS said today that GDP and Non-farm GDP both increased by 0.4% in the December quarter. The 4th quarter’s growth was driven by a 0.5% contribution from final consumption expenditure, 0.3% contribution from inventories and 0.3% contribution from net exports (a negative 0.9% in the September quarter).
The increases were partially offset by a -0.2% contribution from dwelling investment (we know that sector has been taken a hammering, but it’s offsetting the mining construction boom) and -0.2% contribution from business investment.
The ABS said the “industries that drove growth in the December quarter were financial and insurance services and manufacturing, each contributing 0.1% to growth in GDP.”
Manufacturing, as we all now, is supposed to be dead, but it keeps showing distinct signs of life.
The December quarter saw the terms of trade fall 4.7%, (up 3.2% in the September quarter) the first fall since September 2009. This was reflected in real gross domestic income, which fell 0.6% in seasonally adjusted terms for the quarter. That was due to the fall in the terms of trade.
Real net national disposable income (seasonally adjusted) fell 0.9% in the quarter. But over all of 2011, it still grew faster than GDP, 4.9% against 2.3%.
The ABS said that on the expenditure side (in seasonally adjusted terms) “the main contributors… were Household final consumption expenditure (0.3 percentage points), Inventories (0.3 percentage points) and Net exports (0.3 percentage points) with Private gross fixed capital formation detracting 0.4 percentage points.”
The household savings rate dipped to 9% in the final quarter, against 10.1% in the September quarter.
Trend real unit labour costs fell 0.6% while the trend non-farm real unit labor costs fell 0.8%. GDP per hours worked rose by 0.4% in trend terms. Neither outcome fits the scare campaigns currently being waged by the business community and their media cheerleaders about either the need for industrial relations deregulation or our productivity crisis, supposedly caused by lazy workers, red tape and interfering unions.
Household consumption rose 3.5% in the year to December and 0.5% in the quarter.
“The main contributors to growth in Household final consumption were food, purchase of vehicles, Rent and other dwelling services and Insurance and other financial services, with each contributing 0.1 percentage points to growth in Household final consumption expenditure. Government final consumption expenditure increased 1.0% in seasonally adjusted terms,” the ABS said.
Food and vehicle purchases continue to demonstrate that retail is continuing to do well — it’s just not the traditional retail that we’re used to, or that Gerry Harvey or DJs would like.
And how does the 4th quarter and 2011 figures for Australian growth stack up with other major economies? According to the OECD, preliminary real GDP estimates in seasonally adjusted terms showed movement in quarterly growth for: USA (0.7%), France (0.2%), Japan (-0.6%), Germany (-0.2%), UK (-0.2%) and overall OECD total (0.1%). As well, the eurozone contracted by 0.3% in the December quarter, according to EU figures this week.
The 2.3% annual growth compares with 1.6% in the US, 0.7% per cent in the eurozone and the UK, and a 1% contraction for Japan. China grew by 9.2% in 2011.