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Economic Indicators

Australia third-quarter business investment slips, outlook surprisingly resilient

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Australia third-quarter business investment slips, outlook surprisingly resilient
© Reuters. FILE PHOTO: People walk through the Central Business District (CBD) at dusk in Sydney, Australia, June 4, 2021. REUTERS/Loren Elliott

By Wayne Cole

SYDNEY (Reuters) – Australian business investment slipped in the third quarter as pandemic lockdowns shut many firms, though future spending plans proved surprisingly resilient and a rapid recovery is expected now that most restrictions have been lifted.

Figures from the Australian Bureau of Statistics out on Thursday showed capital expenditure fell a real 2.2% in the third quarter to A$32.7 billion ($23.57 billion), in line with market forecasts of a 2.0% drop.

Spending plans for the year to end June 2022 were upgraded to A$138.6 billion, above most analysts’ estimates and a sign business confidence had weathered the disruptions well.

“It suggests that spending this financial year will be over 10% higher than fiscal 2021, comfortably outstripping the levels seen in the three years prior to the pandemic,” said Sarah Hunter, chief economist for BIS Oxford Economics.

“Construction, wholesale trade and transport, postal and warehousing led the way, reflecting the need to expand capacity to properly service the substantial shift to online retailing.”

For the third quarter, most of the pullback in investment came in plant and machinery with the retail and education sectors particularly hard hit by the lockdowns.

Data on gross domestic product (GDP) due next week is expected to show a sharp contraction given stay-at-home rules in Sydney and Melbourne hammered consumption during the quarter.

Yet with 86% of the adult population fully vaccinated, most restrictions are gone and spending has quickly ramped up as retailers count on a bumper Black Friday of sales this week.

Separate data on payrolls out on Thursday showed employment jumped sharply in the last two weeks of October, rounding out a strong month for the states of New South Wales and Victoria.

That pick up in jobs has yet to see much acceleration in wages growth which languished at an annual 2.2% in the third quarter, well short of consumer price inflation at 3%.

That is too slow for the Reserve Bank of Australia (RBA), which wants to see wage growth running at 3%-plus before pulling the trigger on rate rises, something it doubts will happen until 2023 at the earliest.

Investors are wagering the bank is behind the curve on inflation and will actually have to hike the 0.1% cash rate by June next year, if only to keep up with other central banks.

The Reserve Bank of New Zealand (RBNZ) on Wednesday lifted its rate for a second month running and flagged further rises to 1.5% by mid-2022.

($1 = 1.3881 Australian dollars)

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Economic Indicators

German economy dodges recession as war, pandemic weigh

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© Reuters. FILE PHOTO: The skyline with its financial district is photographed during sunset as the spread of the coronavirus disease (COVID-19) continues in Frankfurt, Germany, October 26, 2020, REUTERS/Kai Pfaffenbach/File Photo

BERLIN (Reuters) -The German economy grew slightly in the first quarter from the previous one, data showed, with higher investments offset by the twin impacts of war in Ukraine and COVID-19 that experts predicted would weigh more heavily in the three months to June.

Europe’s largest economy grew an adjusted 0.2% quarter on quarter and 3.8% on the year, the Federal Statistics Office said on Wednesday. A Reuters poll had forecast 0.2% and 3.7%, respectively.

The reading meant that Germany skirted a recession, often defined as two quarters in a row of quarter-on-quarter contraction, after gross domestic product (GDP) fell by 0.3% at the end of 2021.

While household and government spending remained mostly at the same level as in the previous quarter and exports were down at the start of the year, investments grew.

Construction investments, boosted by mild weather, were up 4.6% from the previous quarter, despite price increases, and machinery and equipment investments rose 2.5%.

German business morale rose unexpectedly in May as its economy showed resilience, according to an Ifo institute survey published this week that found no observable signs of a recession.

However, there is no upswing in sight either, and Sebastian Dullien, director of the Macroeconomic Policy Institute (IMK), predicted the effect of the war and pandemic-linked restrictions in China – Germany’s biggest trading partner last year, according to official data – would be much greater in the second quarter.

ING economist Carsten Brzeski said he was sticking with his baseline scenario of a slight GDP contraction in the second quarter after Wednesday’s reading.

“The build-up of inventories and weak consumption in the first quarter, as well as very weak consumer confidence, clearly dampen the optimism that traditional leading indicators are currently conveying,” he said.

A consumer sentiment index by the GfK institute inched up slightly heading into June from an all-time low in May, with household spending burdened by inflation.

The government forecasts economic growth of 2.2% in 2022.

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Economic Indicators

German economy dodges recession in Q1 despite war, pandemic

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© Reuters. FILE PHOTO: The skyline with its financial district is photographed during sunset as the spread of the coronavirus disease (COVID-19) continues in Frankfurt, Germany, October 26, 2020, REUTERS/Kai Pfaffenbach/File Photo

BERLIN (Reuters) -The German economy grew in the first quarter, in line with expectations, despite difficult economic conditions caused by the war in Ukraine and the pandemic, data showed on Wednesday.

Europe’s largest economy grew by 0.2% quarter on quarter and by 3.8% on the year, adjusted for price and calendar effects, the Federal Statistics Office said. A Reuters poll had forecast growth of 0.2% and 3.7%, respectively.

The first-quarter growth meant Germany avoided a recession, defined as two quarters in a row of contraction, after gross domestic product (GDP) fell by 0.3% at the end of 2021.

“Despite the difficult global economic conditions, the German economy started the year 2022 with slight growth,” said Georg Thiel, president of the statistics office.

While household and government spending remained mostly at the same level as in the previous quarter and exports were down at the start of the year, investments helped boost the economy.

Construction investments, boosted by mild weather, were up 4.6% from the previous quarter, despite price increases, and machinery and equipment investments also saw a rise, of 2.5%.

The German government in its spring forecast said that it expects overall economic growth in 2022 of 2.2%.

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Economic Indicators

German economy sees growth in Q1 despite war, pandemic

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on


© Reuters. FILE PHOTO: The skyline with its financial district is photographed during sunset as the spread of the coronavirus disease (COVID-19) continues in Frankfurt, Germany, October 26, 2020, REUTERS/Kai Pfaffenbach/File Photo

BERLIN (Reuters) -The German economy grew in the first quarter, in line with expectations, despite difficult economic conditions caused by the war in Ukraine and the pandemic, data showed on Wednesday.

Europe’s largest economy grew by 0.2% quarter on quarter and by 3.8% on the year, adjusted for price and calendar effects, the Federal Statistics Office said. A Reuters poll had forecast growth of 0.2% and 3.7%, respectively.

The first-quarter growth meant Germany avoided a recession, defined as two quarters in a row of contraction, after gross domestic product (GDP) fell by 0.3% at the end of 2021.

“Despite the difficult global economic conditions, the German economy started the year 2022 with slight growth,” said Georg Thiel, president of the statistics office.

While household and government spending remained mostly at the same level as in the previous quarter and exports were down at the start of the year, investments helped boost the economy.

Construction investments, boosted by mild weather, were up 4.6% from the previous quarter, despite price increases, and machinery and equipment investments also saw a rise, of 2.5%.

The German government in its spring forecast said that it expects overall economic growth in 2022 of 2.2%.

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