Annette Beacher, chief Asia-Pacific macro strategist at TD Securities, suggests that their tracking for Australia’s Q1 GDP is a feeble 0.2% q/q.
Key Quotes
“Partial data released to date are real retail sales (-0.1% q/q) and construction work done (-1.9% q/q). Tomorrow, business investment is updated with the plant and equipment component of capex (TD -1% q/q) and next week brings inventories, government spending and net exports ahead of the actual report released Wednesday, June 5.”
“Our annual GDP growth is tracking at 1.5% y/y, back to GFC levels and below the RBA’s downgraded May projection of 1.7% for mid-year and 2.6% by end-2019. After the tape bomb “June is live” from RBA Governor Lowe last week, unanimous consensus is for -25bp to 1.25% on June 4. While the decision is the day before Q1 GDP is released, the Board will discuss the soggy suite of Q1 partial data to date.”
“June OIS is 100% priced for a cut (and 200% by Sept). After disappointing the 60% odds priced for a May cut immediately after Q1 CPI, the Governor’s message that the ‘case for easing’ will be made next week suggests it is highly unlikely that the RBA will “shock” the markets with another pause. Usually when the RBA adjusts the cash rate, the concluding paragraph tends to be neutral.”
“However, June isn’t the issue, it’s the discussion of the terminal rate that is challenging the markets.”
“We favour a short pause at 1.25% for the RBA to not only assess the impact of the June cut, but determine exactly what fiscal stimulus is coming down the pipe and what impact this could have on the economic outlook.”
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