Australia: Economic recovery continues in Q1
The result beat market expectations and followed Q4 2020’s 3.2% expansion. Meanwhile, on an annual basis, the economy rebounded in the first quarter, increasing 1.1% year-on-year and contrasting the 1.0% contraction recorded in the fourth quarter of last year.
The first quarter’s result was driven by sturdy domestic demand. Growth in fixed capital spending accelerated in Q1, coming in at 4.7% in seasonally-adjusted quarter-on-quarter terms, following the 3.4% increase tallied in the prior quarter.
This came on the back of strong investment in machinery and equipment and dwellings, and was partly driven by the government’s fiscal incentives. Meanwhile, household spending growth moderated but remained healthy nonetheless, coming in at 1.2% in Q1, following Q4 2020’s 4.5% jump. However, government spending dropped 0.5% in Q1, swinging from Q4 2020’s 0.9% increase. Lastly, restocking added 0.7 percentage points to growth in the quarter, as companies likely opted to replenish their warehouses amid vaccine-related hopes of higher demand, and emerging supply disruptions.
The external sector, meanwhile, dragged heavily on the economy, as growth in imports outpaced the increase in exports. The expansion in exports of goods and services moderated to 0.5% in Q1 (Q4 2020: +4.1% s.a. qoq). Meanwhile, imports of goods and services increased 3.7% in Q1, highlighting the ongoing recovery in domestic activity (Q4 2020: +5.4% s.a. qoq). Overall, the external sector subtracted 0.5 percentage points from growth. ■