Australian GDP spikes lower in Q3 2016

Australia´s economy registered a rapid and rare contraction in the third quarter as construction and investment spending fell sharply, although gross domestic product was seen bouncing back during the final stretch of the year.

The country´s gross domestic product fell by 0.5% quarter-on-quarter, following an expansion of 0.6% over the three months ending in September, according to the Australian Bureau of Statistics.

That marked just the fourth episode of economic contraction Down Under in over 25 years.

For Commonwealth Bank chief economist Michael Blythe, the data were more akin to a 'pothole' than the start of something more sinister.

Besides the adverse weather, Blythe pointed out the impact which the election period between June and July may have had.

In comparison to a year ago, GDP growth slowed from a 2.2% pace in the second quarter to 1.8% in the third.

Investment in new buildings dropped 11.5%, the most since September 2009, although poor weather and high rainfall were cited as factors.

Mining investment continued to be a key source of weakness, declining by 10.6% for a twelfth consecutive quarter.

Helping to limit the sharp contraction, household consumption rose by 0.4%.

Despite Wednesday´s data, economists were generally sounding a confident note that GDP was set to bounce back in the fourth quarter.

According to Paul Bloxham and Daniel Smith at HSBC, the bulk of the rise in commodity export prices had already taken place and a significant ramp-up in export volumes had yet to materialise after a build-out in capacity.

The large rise in bulk commodity export prices was set to boost incomes in the fourth quarter, they added.

Blythe offered a similar line of reasoning.