"Domestic demand was likely subdued on the back of weak consumption. Retail sales growth was flat in Q2 after a strong start to the year as consumer sentiment dipped below 100."
-Analysts from investment bank Standard Chartered
During the last two decades Australian economy has shown a stable growth and avoided falling into recession, fed by a boom from mining sector, and now due to waning output from mining sector and slowdown in the Chinese economy, this rally could be coming to a close. Nevertheless, the Oz country expanded more than initially was expected in the second quarter, helped by increased consumer and government spending, which offset a very flat performance elsewhere. The Australian Bureau of Statistics said the nation's gross domestic product grew 0.6% in the second quarter, from the first quarter's growth of 0.5% and beating analysts' expectations which projected the same reading. On a yearly basis, the economy expanded 2.6%, also outpacing estimates.
This data aligns with the latest reports that shown Australian economy is slowing, as investment in the mining sector fell significantly, when compared with levels seen during the last decade. With falling commodity prices and weak demand from Australian biggest trading partner, the number of new mining projects has been cut back rapidly, leading to more firings. Amid these factors the Treasury has already warned they expected wider budget deficit in the next three years, and downgraded its growth forecast for this fiscal year.
© Dukascopy Bank SA