Following encouraging data from the Australian Bureau of Statistics yesterday, economists have revised up their estimates for March quarter GDP in today’s national accounts, with some suggesting the figure could be 1.5% to 2% instead of the forecast 1.1%.
The 1.1% forecast would see annual growth for the 12 months to March around 0.3% but the higher estimates now suggest it could be as high as 1% or a touch more.
A figure of 2% or more would be a lot closer to the 3.1% reported for the December quarter and provide more evidence that the economy is travelling OK – although the current Covid lockdown in Victoria will hurt consumption and growth in the June quarter National Accounts and GDP data when that is reported in early September.
A big surprise yesterday was the estimate from the Australian Bureau of Statistics that a record current account surplus in the March quarter will detract 90.6% from GDP – economists had though the detraction could be double that.
The ABS said the terms of trade rose 7.4% in the quarter which was better than expected as well while inventories rose 2.1% in the quarter which will also add to growth. The forecast was for a rise of 0.25 for the quarter. The rise in the terms of trade will see nominal GDP rise faster than expected.
RBC Capital Markets lifted its first-quarter GDP growth estimate from 0.6% to 1.8% in the wake of the data dump from the ABS. Westpac lifted its forecast for the quarter to 1.6% from 1.4% and the annual rate to 0.7%.
The Commonwealth Bank forecast GDP to grow by 2% for the quarter and 1.1% through the year.
Retail trade volumes though will detract 0.5% from GDP.
Company profits fell 0.3% – missing market expectations of a 3.4% rise – that was due to lower government subsidies, such as the reduced JobKeeper. Wages rose 2.0% but that was bolstered by the last of the JobKeeper payments which ended on March 28.
Government spending was flat and is forecast not to contribute to growth in the March quarter.
Meanwhile the ABS pointed out that the rise in iron ore prices in the quarter helped boost the current account surplus by $2.3 billion to a record $18.3 billion in the March quarter.
ABS Head of international statistics Andrew Tomadini said the gains came on the back of strong commodity prices, particularly iron ore. Higher rural exports also helped.
Metal ores and mineral exports reached its highest value on record, $48.2 billion in March quarter 2021.
Mr Tomadini said favourable weather conditions domestically and solid demand internationally saw the exports of rural goods remain strong through the quarter.
Total exports of goods and services rose by $7.8 billion – or 7% – during the quarter, while imports of goods and services rose $2.6 billion, or 3%.
The net primary income deficit rose $3.1 billion to $6 billion.
The financial account deficit increased by $4.7 billion to $15.2 billion, mainly due to the increase in foreign equity purchases by Australian funds, the decreases in debt issued abroad by Australian banks and foreign holdings of Australian Government debts.