The overarching story from this week’s Data Wrap is that economic conditions in South Australia have moderated recently. Data on final demand, exports and retail sales all point to weaker trends during the early months of the year.
South Australia’s final demand growth slows
The ABS released estimates of state final demand (SFD) on Wednesday as part of the National Accounts, which provides one of the best guides to the recent macroeconomic performance of the South Australian economy. SFD is an aggregate of private and public final consumption expenditure, and private and public gross fixed capital expenditure. It does not take into account trade activity, and is therefore an incomplete measure of overall activity (latest results for exports are considered below).
The latest data reveal that final demand growth has slowed in South Australia. Quarterly growth in SFD, measured in trend terms, has slowed from a previous robust peak of 1.3 per cent in the June quarter 2017 to 0.4 per cent in the March quarter 2018. The latest quarterly result was the weakest since the December quarter 2015, but only a little below the previous decade average quarterly growth rate.
Looking more closely at the March quarter results, business investment fell by 1.3 per cent, which represents the third consecutive quarterly fall. Public sector capital spending also fell (-1.7 per cent), but remains at a high level by historical standards. The fall in public sector investment was partly offset by an increase in government final consumption expenditure (up 1.1 per cent). Growth in final demand was mainly driven by household consumption expenditure, which rose by 0.5 per cent, contributing 0.3 percentage points to the 0.4 per cent rise in SFD for the quarter.¹ Dwelling investment also improved marginally (up 0.3 per cent).
Turning to the national results, Australia’s real gross domestic product rose by 0.7 per cent in real trend terms in the March quarter 2018. The national economy has expanded at this pace for four quarters now, which is in line with estimates of potential growth. Household consumption, general government consumption expenditure and international exports of goods and services made the largest contributions to trend GDP growth in the March quarter.
A much more detailed analysis of the latest National Accounts results will be provided to Corporate Members in the upcoming June Economic Briefing.
South Australian exports ease
South Australia’s overseas exports eased over the summer period, latest balance of payments data show. Overseas exports of goods and services in real trend terms fell by 4.2 per cent in the March quarter 2018, to be down 7.9 per cent compared to a year earlier. The recent quarterly fall was driven by lower exports of goods (down 4.8 per cent), while services exports were also a little weaker (down 2.0 per cent).
Exports have not fallen as much in value terms, which indicates that higher prices have partly offset lower export volumes.
Disaggregated data, which is only available on a nominal basis, suggests that the recent decline in South Australian goods exports was due to dips in exports of ‘alcoholic beverages’ (i.e. wine) and ‘food and live animals’, while ‘machinery and transport equipment’ exports have continued their downward trend.
Retail sales stall
Momentum in South Australian retail sales has evaporated over recent months after growing strongly through 2017. The value of retail sales in trend terms fell by 0.1 per cent in April after flat-lining over the previous two months. Nationally, retail sales rose by 0.3 per cent in April, which follows similar rises in February and March. Growth has been strongest in the Northern Territory, ACT, Victoria and New South Wales, and weak in Western Australia and Queensland.
¹ Household consumption accounts for about 58 per cent of SFD, and consequently has a dominant influence on overall SFD.