Data wrap - final demand moderates amidst a cooling national economy

In the Data Wrap we review yesterday’s quarterly National Accounts which provides one of the most comprehensive insights into the recent macroeconomic performance of the state and national economies. We also consider the first retail sales estimates for 2019.

South Australian final demand growth moderates amidst a cooling national economy
Quarterly National Accounts data released by the ABS yesterday revel that aggregate spending in South Australia grew solidly in 2018, but did lose momentum through the course of the year. Annual growth in real state final demand (SFD), measured in real trend terms, slowed from 3.5 per cent in the December quarter 2017 to 2.5 per cent in the December quarter 2018. The latest annual result is reasonably healthy by recent historical standards, being 0.5 percentage points above the previous decade average.


The slowdown in South Australia final demand over the past year was broadly based, reflecting weaker public sector spending growth in terms of both investment and consumption spending, a slowdown in household consumption, and weaker growth in business investment. In comparison, dwelling investment continued to expand at a solid pace (up 6.0 per cent).

Household consumption expenditure, which is the single largest component of final demand, rose by a subdued 1.5 per cent through the year to the December quarter 2018, its weakest annual rise since the September quarter of 2014. Household spending has been held back by sluggish growth in aggregate incomes, brought about, in part, by a lack of employment growth since early 2018. Total compensation of employees in nominal trend terms rose by just 0.5 per cent through the year to the December quarter 2018 – a marked slowdown from the 4.7 per cent rise recorded in 2017.

The slowdown in final demand for South Australia is consistent with national patterns. National final demand also rose by 2.5 per cent through the year to the December quarter 2018, which compares with a rise of 3.4 over the previous year.

The latest National Accounts reveal that the Australian economy grew more slowly than expected in the final quarter of 2018. Gross domestic product rose by just 0.3 per cent in real trend terms, leading year ended growth to slow to 2.3 per cent. This annual result is well below the Reserve Bank of Australia’s recent forecast of 2.75 per cent. In per capita terms GDP actually fell by 0.1 per cent in the December quarter.

A slowdown in the pace of household consumption, lower dwelling investment, stagnant business investment, and the ongoing negative impact of drought conditions on farm sector output all weighed on GDP growth in the December quarter.  Public sector investment spending, which is currently at a strong level, also made little contribution to GDP growth in the December quarters. In contrast, public sector consumption expenditure continued to grow at a solid pace.

Retails sales resume sluggish growth in January
Data released by the ABS today suggests that South Australian retail sales resumed growing weakly at the start of 2019 following a period of stagnation in the latter part of 2018. The value of retail turnover in seasonally adjusted terms rose by just 0.1 per cent in January following a decline of 0.3 per cent in December. This earlier fall followed no change in the level of retail sales in October and November.

Australian retail turnover also rose by 0.1 per cent in January 2018 falling a noticeable fall in December 2018 (down 0.4 per cent). However, unlike South Australian retail sales, national retails sales had been growing relatively strongly prior to the December fall.

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