Despite setting a new record high yesterday, the ASX has fallen today, shedding 0.36% or 30.5 points to land at 8,464.70.
The main culprit was disappointing economic growth data from the Australian Bureau of Statistics (ABS), with September growth coming in at just 0.3% compared to analyst expectations of 0.4%-0.5% and annual growth sitting at just 0.8% compared to expectations of 1.1%.
“Our economy is growing but very slowly, weighed down by interest rates, cost-of-living pressures and global uncertainty,” Treasurer Jim Chalmers said in response to the ABS data.
“Growth at 0.3% in the September quarter and 0.8% through the year is below historical averages and below market expectations.
“Today's release shows growth is below what most economists expected, demonstrating that demand is weaker, not stronger, than most economists forecast.”
More on that in a moment.
As for the market itself, there was weakness in Real Estate in particular, down 1.56%, but also in utilities (-0.85%) and Financials (-0.89%).
On the other side of the ledger, Info Tech gained 0.36% despite the market’s mood, Materials lifted 0.60% and Energy 0.37%.
The worst-performing stocks were Star Entertainment Group, down 5.56%, and Audinate Group, down 5.15%.
The ASX has gained 0.69% over the last five days and sits 0.58% off its 52-week high.
What do latest GDP numbers mean?
Moody’s Analytics head of China and Australia Economics Harry Murphy Cruise joins us to discuss what the GDP numbers mean and when we can expect the next interest rate cut.
“The Aussie economy remains in the slow lane as sky-high borrowing costs and structurally higher prices zap spending,” Cruise writes.
“Across the quarter, the economy grew just 0.3% quarter-on-quarter (q/q) and 0.8% year-on-year (y/y), the latter being the weakest print since the early 1990s recession, outside of the pandemic.
“On a per capita basis, the economy entered its seventh consecutive quarter of falls.
“Governments were the lone heroes of the September quarter.
“For starters, a surge in defence-related spending pushed new public investment up 5.3% q/q — the strongest jump since 2018.
“What’s more, governments across the country picked up the tab for a chunk of household spending, notably via electricity rebates and cuts to public transport.
“Those cost-of-living measures helped push government consumption up 1.4% from the June quarter. All up, public demand added 0.6 percentage points to the quarter’s growth.
“The government spending splurge kept household consumption a little lower than it otherwise would be. In effect, the cost-of-living measures took a chunk of what would usually be considered household spending (paying electricity bills and public transport fares) and put it on governments’ books.
“That switcheroo, combined with tax cuts, freed up finances that could have been used on other goods and services. But households chose not to loosen the purse strings; instead, they funnelled the savings into bank accounts and paid down mortgages.
“That kept household spending flat through the September quarter and pushed the household saving ratio to its highest since the end of 2022."
Lacklustre trade, rising tech spending
“On the businesses front, investment fell 0.6% q/q, weighed down by weaker non-dwelling construction," Cruise continued.
“It was better news for machinery and equipment, while computer software spending continued its run of gains as firms looked to play catch-up on the technology revolution (did someone say AI?).
“Trade was lacklustre through the quarter, adding just 0.1 percentage points growth.
“Export volumes crawled just 0.2% higher from the June quarter, helped by higher coal and metal exports.
“Offsetting some of the good news, production disruptions were a handbrake on liquefied natural gas sales, and weaker international student arrivals pushed service exports backwards.
“Meanwhile, import volumes fell 0.3% q/q, with a surge in travellers to Europe over the Aussie winter failing to offset the drop in consumption and intermediate goods purchases.
“With export prices continuing to move lower, the terms of trade fell 2.5% q/q to be more than 17% below its mid-2022 peak.
“The Aussie economy will remain sluggish until interest rates come down. Despite progress on inflation, that first cut still looks a little while off.
“Members of the Reserve Bank Board are a cautious bunch and will want to be certain inflation is under control before pulling the rate cut trigger. We had expected the December quarter inflation print to provide that evidence, putting the first rate cut in February.
“However, recent comments from board members suggest it will take back-to-back showings in the December and March quarter prints to convince the board to cut.
“With the March quarter data not due out until late April, May’s monetary policy meeting will be the next scheduled opportunity for the board to cut.”
Small cap gains
Gains in the small cap sector were made by Orthocell Ltd (ASX:OCC, OTC:ORHHF), which was up 18.19% to a daily high of $1.04, Polymetals Resources Ltd (ASX:POL) hit $0.885, an increase of 16.45% on the previous close, Green Technology Metals Ltd (ASX:GT1, OTC:GTMLF) increased 15.8% to $0.066, Tryptamine Therapeutics Ltd (ASX:TYP, OTC:TYPTF) reached $0.046, a 15% improvement, Imugene Ltd (ASX:IMU, OTC:IUGNF) climbed 14.45% to $0.0435 and Cadoux Ltd (ASX:CCM, OTCQB:FYIRF), which was as much as 11.5% higher to $0.049.
Other gains were made by Pantoro Ltd (ASX:PNR, OTC:PNTOF), which rose 10.53% to $0.105, Lumos Diagnostics Ltd reached $0.032, a lift of 10.35%, FireFly Metals Ltd (ASX:FFM) was 4.88% higher at $1.075, Predictive Discovery Ltd (ASX:ASX:PDI (OTC:IDXG), OTC:PDIYF) increased by 4.26% to $0.245 and Anteris Technologies Ltd (ASX:AVR, OTC:AMEUF) reached $10.15, a 2.53% rise on the previous close.
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