June quarter GDP came in at +0.2% for the quarter. That was bang on average market expectations but higher than my zero. Annual growth came in at +2.5% with annual average at +2.7%. Both annual rates were higher than expected by virtue of revisions that saw three of the previous four quarters revised upwards.
On a production (sector) basis much of the
detail was as expected. Agriculture
(-6.4 q/q) fell sharply on the back of the drought while business services
(+2.6%) and retail trade (+2.1%) posted strong growth. The surprises for me were a smaller than
expected decline in the manufacturing sector and stronger than expected
construction activity, the latter thanks to strong infrastructure
On the expenditure side, again much of the
detail was as expected. There was a big
negative contribution from net exports as exports fell -5.9% (q/q) and Imports
rose +1.3%. On the plus side, personal
consumption rose 1.5%. The surprises in this
measure of GDP were a positive contribution from government expenditure and a
more significant build- up in inventories.
While the drought has now knocked about 0.7% off GDP growth in the March and June quarters of this year, overall GDP growth has
weathered the drought surprisingly well thanks to the offsetting influences of strong household expenditure and construction activity.
Furthermore following the drought, growing conditions have benefited
from a wet and warm winter which is supportive of a recovery in dairy volumes. That will turn what has been a significant headwind for growth into a positive in the months ahead.
There is nothing in this result to alter our
expectations of stronger growth in the period ahead. We think both September and December quarters
of this year are likely to post GDP growth of around 1% each per quarter as construction cointinues to grow and households continue to spend.
While that level of growth is significantly stronger than the
first half of the year its, only slightly ahead of the same period last year
thanks to the ripper December 2012 quarter increase of 1.6%. That has us expecting calendar year annual average
growth of 2.8% in 2013, pushing on to 3.5% during 2014.