Dec. 1 (Bloomberg) -- Australia’s economy expanded at half the pace economists forecast in the third quarter as construction fell and a stronger currency contributed to the biggest drop in exports in more than seven years.
Gross domestic product advanced 0.2 percent from the second quarter, the worst performance since a contraction at the end of 2008, the Bureau of Statistics said in Sydney. The median forecast in a Bloomberg survey of 21 economists was for a 0.4 percent gain from the previous period, when GDP rose 1.1 percent.
Australia’s dollar slid to a 10-week low against its U.S. counterpart after today’s release, paring an advance for the year that’s eroded export competitiveness. The slowing indicates little immediate need for the Reserve Bank of Australia to add to the seven rate increases since October 2009 that have hurt business confidence and reined in an expansion in housing.
“Consumers and business are holding onto the cash until the economic recovery gains traction,” said Savanth Sebastian, an economist at Commonwealth Bank of Australia in Sydney. “The double-digit household savings ratio and weak private-sector investment outside the mining sector adds weight to this.”
The Australian dollar slid as low as 95.37 U.S. cents, the lowest level since Sept. 24, and fetched 95.57 U.S. cents as of 1 p.m. in Sydney. The S&P/ASX 200 index of stocks retreated 0.3 percent to 4,572.90.
Exports fell 2.4 percent in the quarter, the steepest drop since the second quarter of 2003, subtracting 0.6 percentage point from GDP, today’s report showed. Construction declined 0.9 percent from the prior quarter.
Household spending increased 0.6 percent, adding 0.3 percentage point to GDP growth, the report showed.
The economy grew 2.7 percent from a year earlier, the report showed. Economists had forecast a 3.4 percent expansion.
A private report earlier today showed Australian manufacturing contracted in November for a third month as the nation’s surging currency eroded demand for exports and higher borrowing costs curbed consumer spending.
The manufacturing index fell to 47.6 from 49.4 in October, the Australian Industry Group and PricewaterhouseCoopers said in a survey released in Canberra today. A number below 50 indicates contraction. Capacity utilization fell to 74.6 percent from a 2 ½-year high of 77.4 percent, the report showed.
The RBA said in a release yesterday that loans provided by Australian banks and finance companies rose 0.1 percent in October from the previous month, when they were flat. Lending to companies fell 0.8 percent from September and 3.2 percent from a year earlier, the central bank said.
Australian business confidence fell for a second month in October as conditions deteriorated to the weakest in more than a year on declining profitability for retail and construction companies, according to a private monthly survey released Nov. 9.
Growth may accelerate after the nation’s employers added 106,200 jobs from July through September, the biggest increase in four years. That helped strengthen the local currency 15 percent against the U.S. dollar in the third quarter, according to data compiled by Bloomberg. Exports account for about one-fifth of the country’s GDP.
“Exports growth softened but followed an exceptionally strong performance in the second quarter,” Matthew Circosta, an economist at Moody’s Analytics in Sydney, said before the report. “Shipments of coal and iron ore to China slowed as the Chinese scaled back steel production.”
In testimony last week to lawmakers in Canberra, Governor Glenn Stevens reiterated the central bank’s outlook for growth of about 3.5 percent in 2011 and 2012. He signaled interest-rate policy was appropriate for now, adding “it would take only pretty moderate growth in the second half of the year to achieve that forecast for 2010.”
RBA policy makers expect annual growth to accelerate, boosted by projects such as BG Group Plc’s $15 billion liquefied natural gas venture in Queensland, generating 5,000 construction jobs and potentially stoking inflation pressures.
BG, Chevron Corp., Royal Dutch Shell Plc and ConocoPhillips are among energy companies investing about A$200 billion in proposed LNG projects in Australia.
“On all the indications available, we are living through an event that occurs maybe once or twice in a century,” Stevens said in an address to a Committee for Economic Development of Australia event in Melbourne two days ago. “We obviously have to be wary of overheating.”
A report yesterday showed Australian home-building approvals snapped a six-month decline in October. The number of permits granted to build or renovate houses and apartments surged 9.3 percent from September, the Bureau of Statistics said in Sydney. That exceeded the median forecast for a 1.4 percent gain in a Bloomberg survey.
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