Australian dollar hit hard after massive Q3 GDP miss

The Australian dollar fell significantly, after recent ABS figures revealed Australia’s Gross Domestic Product slowed in September, missing expectations.

Q/Q growth fell to 0.3%, and was expected to come in at 0.6%, while domestic demand came in weak.

IG Market Analyst Kyle Rodda says the numbers were a significant miss.

“The theme of a weaker Australian consumer shines through. Spending is soft, consumption looks like its still being funded by eating into savings, and income growth is down.” Said Mr Rodda.

According to the latest ABS figures, last quarter the economy grew by 0.9%, meeting expectations while GDP growth over the year slowed to 2.8% below 3.3% expectations.

ABS figures show household final consumption expenditure in September increased 0.3% contributing 0.2 percentage points to GDP growth.

September compensation of employees increased by 1.0%, while net exports contributed 0.3 percentage points to GDP growth driven by a decline in imports.

Figures show the terms of trade rose 0.8% in Q3.

The data has surprised analysts, particularly after the RBA at its meeting yesterday had talked up the growth prospects of the Australian economy, forecasting GDP growth will average 3.5% this year and next.

“Perhaps softer consumption will begin to weigh more on the economy than previously expected. Australian households don't look like they could whether a rate hike at the very least.” Said Mr Rodda.

Australian Dollar Price

The Australian dollar against the greenback crashed upon the news, coming off well-over 50 points immediately after the release. The AUD/USD price fell below 0.7300 from 0.7352 in the aftermath and is predicted to keep falling.

The post-GDP crash comes after the A-Dollar fell below 0.7350 last night as risk-proxies were dumped in reaction to China-US trade war concerns.

IG Market analyst, Kyle Rodda says “The likelihood rates traders will bring forward their RBA-hike expectations in from 2020 is rather slim.”

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This information has been prepared by IG, a trading name of IG Markets Limited and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. International accounts are offered by IG Markets Limited in the UK (FCA Number 195355), a juristic representative of IG Markets South Africa Limited (FSP No 41393). South African residents are required to obtain the necessary tax clearance certificates in line with their foreign investment allowance and may not use credit or debit cards to fund their international account.

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