Australian Q3 GDP Shrinks After 5 Years

Australia's gross domestic product was down a seasonally adjusted 0.5 percent on quarter in the third quarter of 2016, the Australian Bureau of Statistics said on Wednesday.

The third-quarter GDP which fell 0.5 percent q/q, registering the first biggest decline since global financial crises, from up 0.6 percent q/q in the previous quarter. The market had expected GDP to rise 0.3 percent. Additionally, yearly data rose 1.8 percent, way lower than the market consensus of 2.2 percent y/y gain, from prior 3.3 percent.

Although the Australian economy contracted by 0.5% in the third quarter, this is very unlikely to be the start of a recession as GDP will most probably rebound in the fourth quarter. Nonetheless, this is only the fourth fall in GDP in 25 years, which highlights that the economic backdrop is not consistent with a big rise in underlying inflation, said Capital Economics in its research note.

Economic activity contracted in a number of areas this quarter. Private investment in new buildings detracted 0.3 percentage points from GDP growth, while new engineering and new and used dwellings detracted 0.2 and 0.1 percentage points respectively.

Public capital expenditure detracted 0.5 percentage points from growth as it declined from elevated levels in the June quarter. Net exports detracted an additional 0.2 percentage points from growth. Australia's terms of trade rose 4.5 per cent through the September quarter.

Household financial consumption expenditure, the largest component within the Australian economy, grew by 0.4% during the quarter, contributing 0.3 pcts to the GDP figure.

All four of the construction sectors in Australia continued to contract in November, albeit at a slower pace, with a Performance of Construction Index score of 46.6, including apartment, house, engineering and commercial building.

Among the sub-components, new orders, employment and deliveries all contracted, while input prices, selling prices, wages and capacity utilization expanded.

A number of other industries also recorded below trend growth, or declined, this quarter, including financial and insurance services, professional scientific and technical services, rental hiring and real estate services and administrative support services.

The largest offset to these falls was agriculture which grew 7.5 per cent. Mining production contributed no growth, but maintained its historically high levels of production.

Subdued activity in the building industry contributed to a decline in the income of small businesses, with gross mixed income down 5.8 per cent.

Meanwhile, the benchmark Australia's S&P/ASX 200 index traded 0.26 percent higher at 5,476.50 by 04:50 GMT. While at 04:00 GMT, the FxWirePro's Hourly Australian Dollar Strength Index stood neutral at -10.01 (lower than -75 represents bearish trend).

The Australian government bonds gained Wednesday after recent data showed that the country’s third-quarter gross domestic product (GDP) declined for the first time since global financial crises.