The Australian And Canadian Economies Are Expected A Significant Decline In GDP
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The coming week will be full of important data. Australia and Canada will share their economic growth (GDP) reports.
Australia GDP
Australia's Q4 GDP is scheduled for next week and will provide the latest information on the health of the economy and whether the central bank's tightening cycle will have a further impact on growth. As a reminder, earlier GDP figures were weaker than expected in Q3 as Q/Q growth slowed to 0.6% vs. 0.7% (previously 0.9%), and the y/y ratio also failed to meet expectations, but accelerated compared to Q2, increasing by 5.9% vs. 6.2% (previously 3.6%).
Growth remained driven by household spending, with the Australian Bureau of Statistics also seeing strong wage growth and a rebound in housing construction, while the annual growth rate was supported by a lower base given that the economy contracted a year earlier due to the COVID-19.
These base effects are also likely to be a factor in the upcoming GDP data. NAB expects a GDP print of 0.9% q/q (2.8% y/y) in Q4 2022. This partly reflects the ongoing recovery in services spending.
Source: investing.com
Partial data on housing investment shows a slight increase in new buildings, but a large decrease in renovations. The nominal value of business investment appears to have declined, with a weak performance in non-renewable and engineering construction. However, data on capital expenditures on buildings and structures suggest a better result.
Growth is expected to slow sharply from then on, driven by flat or negative consumption figures in the second half of 2023 as the full impact of higher interest rates and inflation wears off.
Impact on RBA
This publication is unlikely to affect the path of monetary policy in the near term, with the RBA already signaling further gains in the coming months. Indeed, the national accounts price and wage measures are likely to confirm widespread inflationary pressures in the economy.
Ultimately, the RBA signaled that there would be further gains in the coming months based on the forward-looking reaction function and their latest set of forecasts. That said, a slowdown in growth is likely to be the first sign that the economy is cooling in response to interest rate hikes as global inflation slows down.
Canada's GDP
The Canadian economy is already performing better than expected despite high interest rates, ongoing supply chain disruptions and long-standing fears of a recession.
Inflation is weakening. Job creation is at near record levels. The unemployment rate remains at its lowest level in four decades.
Consumer spending is solid. And we may have seen an interest rate peak, thanks to the continuing fall in inflation that higher rates are supposed to curb.
Canada's monthly GDP change is expected to hold at 0.1%. The quarterly GDP reading is forecast to drop significantly from 2.9% to 1.5%.
Source: investing.com
The BoC still predicts a mild recession this year and warned last week that the first three quarters of 2023 will see near-zero economic growth.
Unemployment is expected to rise from the current 5 percent to around 6.7 percent this year, easing inflationary wage pressures.
The BoC hopes that a tight labor market will enable employers to control wage costs with redundancies instead of redundancies.
Source: investing.com
