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Analysts at  TD Securities has lifted its Q2 GDP f/c to 0.7%/q, 1.6%/y following strong contributions from net exports and Govt spending but risks are for a number to come in below TD’s f/c if private consumption, which is 25% of GDP that still remains unknown, is weak.

Key Quotes

“Net exports are estimated to have added 0.6% pts to Q2 GDP (mkt and TD at 0.3% pts contribution) following the current account smashing expectations with a surplus of A$5.9b – mkt at A$1.5b, TD A$1.7b.”

“The first current account surplus since 1975 was due to the trade balance printing a record high A$20b surplus, while the net income deficit narrowed by A$1.9b to -A$14b, the lowest in 3yrs.”

“The terms of trade rose for the 4th  straight qtr, +1.5%/q, +8.9%/y on the back of strong export prices +2.5%/q. Govt spending is expected to add 0.4% pts to GDP thanks to Consumption rising 2.7%/q, the largest quarterly increase since Q1 2005. These two data releases more than offset the drop from inventories released yesterday of ~-0.5% pts. As such we expect the market is likely to lift GDP estimates ahead of tomorrow’s release.”

“Retail Sales fell 0.1%/m in July, which a surprise was considering this release covered back to back RBA rate cuts and at least the initial tax offset payments. Ex food, retail sales were -0.3%/m, a disappointing outcome.”