Economists sharpen GDP forecasts ahead of national accounts
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The news: Economists have updated their GDP growth expectations for national accounts, due out on Wednesday morning, following new data released on Tuesday.
Some of them have substantially upgraded their forecasts, while those sticking with earlier predictions say it could turn out better than expected.
The numbers: Fresh net export data on Tuesday surprised economists by adding 0.2 percentage points to growth rather than subtracting from economic activity.
The Commonwealth Bank increased its expectation for the fourth quarter GDP to 0.7% over the quarter, compared to their previous forecast of 0.5%, or 1.4% over the year.
Westpac has upgraded its forecast to 0.7% from 0.4%, saying the “upside surprise on business inventories was met with a lower than anticipated growth in imports”.
ANZ has also finalised its GDP forecasts, maintaining them at 0.6% over the quarter. But its analysts pointed to “upside risk”, noting 0.7% is more likely than 0.5%.
Goldman Sachs has left its expectation of 0.6% quarter-on-quarter growth and 1.3% over the year unchanged, though it said the balance of risks is "skewed a little to the upside".
KPMG is expecting 0.7% over the quarter and 1.4% over the year, noting that net exports data and government spending seem to indicate “the economic uplift is starting to occur as per our estimates”.
The context: If these predictions prove true, they would be a significant step up from the 0.8% over the year recorded in the prior quarter and be be a welcome piece of news for the federal government as it stares down an election.
If the economy does grow at 0.7%, economists are noting this is in-line with the increase in hours worked and would mean productivity held up after two consecutive quarterly declines.
The source: Commonwealth Bank, Goldman Sachs, ANZ, Westpac and KPMG economic notes
