The Australian GDP figures have been released today, here’s what was reported and how the ASX 200 responded.
The Australian Bureau of Statistics (ABS) is responsible for tracking and releasing information on Australia’s Gross Domestic Product (GDP). GDP is a commonly used way to measure the growth of the economy.
Australian GDP Release
Australia’s economy grew 0.4% in the March quarter of 2019, according to the ABS release today, the annual growth rate fell to just 1.8%. The ASX 200 went up 0.4% on the back of the announcement.
Household spending slowed and contributed only 0.1% to the growth number. resulting from reduced spending on discretionary purchases.
The drop in household spending could be felt the most by ASX businesses that rely on non-essential spending, businesses like Nick Scali Limited (ASX:NCK) and JB Hi-Fi Limited (ASX:JBH).
The falling housing market has also contributed to the slower GDP growth, with reduced costs in ownership transfer costs, particularly stamp duty.
ABS Chief Economist, Bruce Hockman, said: “The Australian economy continues to grow but more slowly than our long term average of 3.5 per cent.”
The GDP release comes just one day after the RBA reduced the interest rate to 1.25%,
cutting rates for the first time in nearly three years. A factor in the RBA decision was to “support employment growth and provide greater confidence that inflation will be consistent with the medium-term target.”
The Australian Financial Review quoted Treasurer Josh Frydenberg saying, “the economy is softer than it was at the same time last year.”
He continued, “this is where the provision of the tax cuts as well as the interest rate decision yesterday will boost household disposable incomes and will be important.”
Where To Now For The Economy?
Only the next few quarters of GDP results will be able to tell us if Australia is indeed entering a recession, or if the positivity towards the housing market and consumer spending due to the surprise Liberal election win will be justified.
Many Australians seem to be battening down the hatches, which might just be the best time for investors to be focusing on choosing and buying the highest quality shares.
I for one am not letting the economic climate scare me and I am continuing to buy businesses with sound strategies. You might find your next buy in our free report below.
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