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Monthly Economic Indicators

Executive Summary

  • Recent data indicate the economy experienced reasonable growth over the March quarter, although there are hints the pace of growth may ease in the current quarter
  • Consumer price inflation remains low, while the housing market has picked up again
  • International economic data were generally softer in April and the IMF downgraded its global growth forecasts.

Data released in the month indicate the economy experienced reasonable growth in the March quarter, although there were hints of a slower pace of growth in the current quarter. The number of businesses reporting increased trading activity in the March quarter was steady, but business confidence waned and fewer businesses expect activity to rise in the current quarter.

Indicators of retail spending growth remained solid although consumer confidence eased a little over the quarter, which might indicate a slower pace of household consumption growth in coming quarters.  On the other hand, the resurgent housing market is likely to support consumer spending as household wealth rises. Net migration and tourist inflows continued to rise. 

The seasonally adjusted March quarter trade deficit narrowed slightly as imports fell further than exports. Lower meat exports drove the fall in exports while capital goods imports were also back sharply. The annual trade deficit widened to $3.8 billion, up from $2.4 billion a year ago.  We expect the deficit to widen further over the year ahead, as dairy and meat export values fall below their year-ago values.    

Consumer price inflation remained low, at 0.2% in the March quarter and 0.4% in the year. Like the Reserve Bank, we expect inflation to remain below the Bank’s 1-3% target range over the next few quarters, as appreciation of the exchange rate maintains downward pressure on tradables prices and non-tradables inflation remains subdued. The Reserve Bank left the Official Cash Rate unchanged at 2.25%.      

Inflation, which is a key driver of growth in nominal GDP and tax revenue, has been much weaker than forecast in the Half Year Update. However, this weakness has been more than offset by stronger-than-expected real GDP growth. The faster pace of nominal GDP growth has contributed to the $800 million variance in February’s year-to-date tax revenue.  The Treasury’s Budget Economic and Fiscal Update, to be released on 26 May, will take account of these developments.

International economic data were generally softer in April and the IMF downgraded its global growth forecasts. The IMF shaved 0.2 percentage points off its global growth forecast (now 3.2% for 2016), indicative of the risks to global economic growth. This month’s Special Topic discusses the latest IMF forecasts in more detail.
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