A 10 per cent surge in the level of business investment in machinery and equipment has helped Western Australia’s state final demand grow 0.4 per cent in the September quarter, as national economic data surprised on the downside.
A 10 per cent surge in the level of business investment in machinery and equipment has helped Western Australia’s state final demand grow 0.4 per cent in the September quarter, as national economic data surprised on the downside.
The state’s businesses spent $3.3 billion in the quarter, seasonally adjusted, on machinery and equipment – the most of any quarter since September 2014.
About $12.2 billion was spent across all forms of business investment, including construction and intellectual property, up 1.8 per cent from the three months to June 2018.
By contrast, household spending fell 0.1 per cent to be $27 billion for the September quarter, breaking six consecutive quarters of gradual improvements.
All up, WA’s state final demand, which excludes exports and imports, was $50.6 billion seasonally adjusted for the quarter.
Nationally, gross domestic product grew 0.4 per cent in September, for an annual rate of 2.8 per cent.
Markets had anticipated an annual rate of 3.3 per cent, after growth of 0.9 per cent in the June quarter.
Queensland, South Australia and the Northern Territory all went backwards in the quarter, while NSW grew at 1.1 per cent.
HSBC chief economist Paul Bloxham said because this result came at a time when the housing market was cooling, some observers may link those two stories together.
“However, before we get too sombre, it is worth keeping in mind that a main driver of the weaker than expected print was a sharper-than-expected fall in mining investment, as the long and lumpy downswing in resources sector investment works its way through the system,” Mr Bloxham said.
“Mining investment fell by 7.5 per cent quarter on quarter and subtracted 0.2 percentage points from GDP in the quarter.
“We also know that the mining sector has already returned to strong profitability, that mining employment growth is lifting and that capacity utilisation in the mining industry is back around its previous peaks.
“In short, today's numbers on mining are not a good reflection of the momentum in the mining industry, they are the last vestiges of the previous long downswing.
“The other surprise, which is more worrisome, was the weaker than expected household consumer spending figure.
“Household consumption rose by 0.3 per cent quarter on quarter (2.5 per cent year on year), versus our expectation that it would print at 0.5 per cent quarter on quarter (2.7 per cent year on year).”
Commsec chief economist Craig James was also positive.
“Economic growth is above ‘normal’, inflation is contained, the jobless rate is at 6-year lows and interest rates remain at record lows,” Mr James said.
“Economic growth was a touch softer than expected in the September quarter, but this only highlights that the economy does bob around from quarter to quarter.
“There were good contributions to economic growth from all quarters in the September quarter.
“Business, government and Aussie consumers all provided a contribution.
“The main negative was inventories.
“But if business ran down the stocks sitting on shelves then this may serve to boost production in coming quarters in order to meet demand.
“Looking forward there are a few challenges.
“The US and China have work to do in securing a trade deal.
“There is Brexit, there are worries about the future health of the US economy.
“At home, the correction in Sydney and Melbourne home prices is still to be played out.
“And there is a federal election in 2019.
“But the economy faces the challenges from a position of strength.
“There is ample scope for stimulus should it be necessary.
“And the Reserve Bank still believes that the next move in rates is up, not down.”
