Australian economy grows less than expected in Q3 as post-COVID boom fades

By Ambar Warrick

Investing.com-- The Australian economy grew for a fourth straight quarter in the three months to September, data showed on Wednesday, but appeared to be losing momentum amid rising inflation and sluggish commodity demand in China.

Gross domestic product for the three months to September 30 grew 0.6% from the prior quarter, data from the Australian Bureau of Statistics (ABS) showed, slowing from a 0.9% rise seen in the prior quarter. The reading also missed market estimates for growth of 0.7%.

On an annualized basis, the Australian economy grew 5.9% from last year, more than the prior quarter’s growth of 3.6%, but below estimates for growth of 6.2%.

Growth during the quarter was largely driven by household spending, the ABS said in a statement. Strength in the jobs market and steady wage growth helped drive consumer spending during the quarter.

But this trend also appeared to be running out of steam, with inflation now reaching a 32-year high, while consumer sentiment dropped to its lowest level since the 2020 COVID-19 pandemic. Growth in consumption slowed to 0.8% in the quarter from a revised 1.2% in the June quarter.

This slowdown was also reflected in an unexpected fall in October’s retail sales reading, which could now herald some weakness in what is arguably the biggest driver of the Australian economy.

Rising interest rates and elevated inflation also weighed heavily on Australian household savings during the quarter.

Still, the country marked a fourth straight quarter of growth after a contraction in the third quarter of 2021 due to the COVID-19 pandemic.

The Australian economy had recovered sharply after the country scaled back most of its COVID-related curbs earlier this year. But this boom now appears to be running out of steam.

Australia’s major commodity exports were dented by softening demand in major market China and lower prices as markets feared weakening commodity demand.

The country logged an unexpected current account deficit in the third quarter, as the value of its exports dropped and as strong domestic demand drove imports higher.

Australia’s housing market remained under pressure from rising interest rates. The Reserve Bank hiked rates by 25 basis points on Tuesday, and signaled that it will consider economic health when deciding on whether to keep raising rates.

The Australian dollar was little changed at around 0.6694 after the reading.