SA Data Wrap – final demand growth slows

Demand growth slows back to trend pace
Outside monthly employment data, quarterly estimates of state final demand (SFD) provides the best gauge of recent macroeconomic developments for the South Australian economy. SFD comprises all final consumption and investment expenditures made in the state, but excludes other forms of economic activity, most notably exports.

The latest SFD estimates released by the ABS last week as part of the December quarter National Accounts showed that South Australian final demand growth slowed during the second half of 2017 but remained at a respectable pace. SFD in real trend terms rose 0.5 per cent in the December quarter 2017 – its weakest rise since the June quarter 2016 but in line with its average pace of growth over the past decade. In comparison, the corresponding national aggregate (domestic final demand) rose by 0.8 per cent in the December quarter.

South Australian final demand had previously grown quite strongly through 2016/17 due to a simultaneous upturn in business and public sector investment activity. However, business investment has softened recently while growth in public sector capital spending has slowed. On a more positive note, total dwelling investment rose solidly in the December quarter 2017 (up 2.0 per cent), while household consumption expenditure continued to expand at a solid pace (up 0.7 per cent).

Building approvals ease but remain at a robust level
ABS building approvals data for January suggests that activity levels in the South Australian construction sector should remain at a healthy level in the short term despite exhibiting some decline over recent months. The total value of building jobs approved fell by 3.9 per cent in January, which is the third consecutive monthly decline. However, the value of approvals was still up 18 per cent compared to a year earlier, and at a robust level by recent historical standards.

The sharp lift in the total value of building approvals over the past year has been driven by a strong rise in approvals of non-residential building jobs (up 38 per cent), while the value of residential building approvals has also risen solidly (8.5 per cent).

Retail sales continue to grow solidly but signs of potential slowdown emerge
The trend estimate of South Australian retail sales rose by 0.5 per cent in January, continuing a pattern of solid monthly growth since last October. The latest data from the ABS shows that South Australian retail sales rose 4.0 per cent through the year to January 2018. In comparison, national retail sales rose by 0.3 per cent in January and were up 2.3 per cent through the year.

Seasonally adjusted estimates of retail turnover for South Australia, which are highly volatile, have fallen for the last two months, which could point to the emergence of a weaker trend in retail spending.


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