The Australian economy slowed sharply in the first three months of the year as the impact of higher interest rates and higher fuel prices slowed consumer spending.
In the March quarter, which includes four weeks of the Middle East conflict and the initial spike in petrol prices, the rate of economic growth was just 0.3 per cent, down from 0.9 per cent during the December quarter.
The figure was below expectations, and for the full year, growth was 2.5 per cent. On a per capita basis, the economy shrunk during the March quarter.
The Australian Bureau of Statistics figures show consumers pulling back, particularly on non-essential items. The Bureau called it “more cautious consumer behaviour”. Productivity fell, and if it weren’t for big spending by businesses on data centres, it’s possible the economy would not have grown at all.
Wall Street is bracing for three jumbo IPOs this year - SpaceX, Anthropic and OpenAI. According to Bloomberg, analysts expect these three listings to raise about $US200 billion combined, while all three companies will likely have market caps at or above the $US 1 trillion mark. It comes after a few quieter years for new listings globally:
Fear & Greed Q+A today
On yesterday's weaker-than-expected GDP figures, and whether Australia is heading for a recession:
"I think the chances that we have two consecutive quarters of GDP going backwards are now getting higher. I haven’t got it quite as my central case at this point. I’m calling for one quarter of negative GDP in the second quarter and then that we sort of meander through — struggle through, if you like — in terms of growth from there.
But I think the chances, the risk, has increased that we have a longer period where GDP contracts.
The other way to think about this — and this is where it gets a bit tricky — is whether the labour market really weakens. The unemployment rate and how quickly it rises, how much it rises, these are the sorts of things we look at when we look back and try to determine whether something was genuinely a recession or not.
Our view is we’re going into a downturn. That downturn has already begun."
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News in brief
Almost 50 per cent of vehicles sold last month across the country were either full electric, or hybrid models, and Chinese manufacturer BYD was the second leading brand.
Bitcoin fell seven per cent yesterday to $US67,000 a unit. While cryptocurrencies had been doing reasonably well, the latest sell-off means the token is down almost 50 per cent from its all-time high of around $US126,000 reached in October last year.
Two of the country’s largest fuel brands will merge after receiving approval from the competition watchdog. Ampol and its 622 sites under its main brand and the U-GO banner will merge with EG Australia, which controls 512 stations.
Luxury retailers Hermes and Chanel are having a good time in Australia with profits and revenues rising last year.
Elon Musk’s SpaceX is finalising the terms of its initial public offering, setting the stage for what is expected to be the largest stock market debut in history.
Fear-o-meter
The Australian economy slowed sharply in the March quarter, but that’s not the bad news. Think of what’s happened since then. A third hike in interest rates and ongoing high fuel prices. The first two rate hikes were February and March, so they will have a much bigger impact this quarter and for the rest of the year.
There’s been a downturn in the housing market and falling consumer sentiment and household spending growth. There’s been a jump in the unemployment rate to 4.5 per cent. Monthly inflation figures that suggest maybe a slowing of price increases.
It is possible that the economy is going backwards already, according to market economists. The official forecast from the RBA is that the economy will slow to just 1.3 per cent this calendar year, and then 1.4 per cent in 2027. Maybe that’s a bit optimistic.
The result provides some comfort to the Reserve Bank. It wants to slow the economy, via higher interest rates, to take the steam out of inflation pressures. It’s clear that Michele Bullock and friends are determined to slay inflation. To keep the analogy going, yesterday’s result suggests the dragon is wounded but not yet slayed.
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