AUSTRALIAN ECONOMIC DEVELOPMENTS
This week the Reserve Bank of Australia (RBA) left the cash rate on hold at a record low of 1.50%, where it has been since August 2016. The RBA’s accompanying statement remained generally upbeat about Australia’s outlook.In particular, the RBA noted that the Australian economy is “performing well” and that “the stronger labour market has led to some pick-up in wages growth... improvement in the economy should see some further lift in wages growth over time.”
Ai Group’s monthly business surveys (the Australian PMI, PSI and PCI) showed mixed results in November (released this week). The recovery in the Australian manufacturing sector slowed in November, with the Australian PMI continuing to indicate expanding conditions but falling to its lowest level this year. In the services industries, the pace of expansion bounced higher in November after easing in recent months, as sales and new orders both accelerated. Businesses will be hoping this November bounce becomes more than just some early holiday-season spending and is sustained over coming months. The construction sector contracted for a third consecutive month in November, after strong activity levels in early 2018. In November, a further lift in infrastructure activity was not able to offset steep falls in the residential construction sectors.
In the latest Australian Industry Group/Australian Constructors Association Construction Outlook survey, the nation's largest non-residential construction companies are expecting their work in major infrastructure projects to keep growing through to mid-2020. However, the pace of growth is expected to moderate as total infrastructure investment moves closer to peak levels. The outlook also points to large falls in revenue from multi-apartment work.
The National Accounts released this week by the ABS confirm that the economy slowed in the September quarter (Q3) of 2018. Thisis consistent with Ai Group's monthly performance indicators since at least the middle of 2018. Australia’s real output volumes (real GDP) grew by 0.3% q/q and 2.8% p.a. in the September quarter (Q3) of 2018, whichwas the slowest quarterly growth rate since Q3 2016. Growth in Q32018 was supported by government spending and net exports.Consumption growth slowed and business investment fell.
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