The ASX closed lower today.
The S&P/ASX200 dropping 97.70 points or 1.43% to 6,728.80, setting a new 20-day low. Over the last five days, the index has lost 3.69% and 10.64% over the last 52 weeks.
The bottom performing stocks were Chalice Mining Ltd (ASX:CHN, OTCQB:CGMLF) down 12.59% and Insignia Financial Ltd down 6.66%.
Energy stocks were hit by a retreat in crude oil and coal prices, with the sector down 2.88%. Whitehaven Coal (ASX:WHC) Ltd, which has gained more than 200% for the calendar year, slid 2.1% today to $8.61, while Woodside Energy Ltd fell 2.8% in the red to $34.11 as brent crude fell 3% overnight to $US92.83
Financials fell 2% and Utilities lost 2.1%.
The only sectors in the green were Information Technology, up 0.33% and Health Care at 0.17% higher.
Making news today
GDP grows putting into question the cost of living crisis
The Australian economy grew by 0.9% in the June quarter, with annual growth now 3.6% higher.
What does this mean?
To some like, VanEck investments head Russel Chesler, Australia is still the lucky country.
"Growth is good, we are fully employed and incomes are high", he said with a caveat that next year could be more difficult.
"Cashed up as they (Australians) are, higher living costs will inevitably put a break on consumers, who account for most of the nation's economic activity.
"While the local economy is performing well now by global standards, growth could moderate in early 2023 as commodity prices could fall in response to slowing global economic growth as higher credit costs weigh on economic activity."
Chesler predicts economic growth could fall below 3% in 2023.
And Treasurer Jim Chalmers isn’t taking an optimistic approach either as he lamented the third consecutive quarter of a decline in real household incomes.
According to Moody's Analytics economist Harry Murphy there will be a slowdown, given the "surge in household spending is unwelcome news for the central bank.
"Households were the biggest support, showing a willingness to spend despite higher cost-of-living pressures and squeezing borrowing costs," Murphy said.
EY chief economist Cherelle Murphy said rate hikes will take effect in the second half of the financial year.
"We expect consumers will ultimately change their spending behaviours, especially as a large proportion (over 30%) of households roll-off fixed rate mortgages over the next year or so, and rates continue to rise.
"But there is some uncertainty in terms of the timing and magnitude of this change, which will largely depend on how aggressively the RBA acts in the face of stubborn inflation."
Inflation is expected to hit almost 8% by the end of the year.
Oxford Economics' Sean Langcake believes Australia will be dragged down by global events.
"Momentum in the global economy has slowed, which will weigh on the Australian economy in the coming quarters," he said.
"Nevertheless, the ongoing strength in the labour market will ensure growth remains positive, albeit at a slower pace."
Given the data released by the Australian Bureau of Statistics today, the RBA is likely to continue on its current policy trend.
"The GDP data has few implications for RBA rate decisions because it was in line with expectations and relates to the June quarter which is ancient history now," AMP Captal senior economist, Diana Mousina said.
"It was expected that GDP growth would be decent over the first half of 2022 as consumer spending on services normalised as travel and services industries completely opened up, which is reflected in today’s data."
While there will be more hikes to come, Moussina believes, the pace will slow.
"Technically the June data would reflect the beginning of the rate hike cycle but any actual impacts of rate hikes on the economy will take longer to show up in the data because of the lags involved with interest rate change."
RBC Australia chief economist, Su-Lin Ong, said of the link between GDP and the RBA’s policy, "The strength of both the wage metrics and various deflators in today’s national accounts would not have gone unnoticed and coupled with the likelihood of continued outsized hikes by various key global central banks keeps the risk to our terminal forecast of 2.85 per cent to the upside even if the pace of tightening eases.
"Still, we caution that the data are backward looking and there are early signs of moderation especially in the rate sensitive and key sector for policy transmission – housing.
"The weakening in this sector across a suite of indicators is likely faster and greater than anticipated foreshadowing a broader moderation in growth ahead against a much weaker and more tricky global backdrop. In part, this underpins our base case for the RBA to drop to 25bp hikes in the coming months now that it is firmly in the neutral zone."
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