GDP review and ASX 200 afternoon report: 1st of March 2023

The ASX 200 trades six points higher (0.09%) at 7264 at 3 pm, Sydney time.

GDP review

The ASX 200 has rebounded from early losses following the release of weaker-than-expected Australian Q4 GDP and a lower-than-expected monthly CPI that have combined to ease RBA “rate hike fever” that has swept through markets since early February.

The volatile monthly CPI indicator (which considers updates for only 62% of the basket and has a limited history) showed inflation in January increased by 7.4%, slowing from its 8.4% reading in December, below market consensus for an 8% rise. While caution is required around reading too much into this measure - taken at face value, peak quarterly inflation may now have passed.

Turning to the national accounts, the Australian Q4 GDP rose by 0.5% QoQ (vs 0.7% exp) to be 2.7% higher on the year and although this is the fifth consecutive increase, growth has slowed in the last two quarters.

Key highlights:

• Consumer spending grew by 0.3%, the weakest quarterly result since the Covid-19 Delta variant lockdowns in September 2021. This is a red flag that consumers are tightening their belts after feeling pressure from higher interest rates and increased cost of living costs
• Net exports added 1.1 percentage points to GDP growth, and inventories detracted 0.5 percentage points
• Australia’s terms of trade rose 0.6% as growth in export prices (+1.8%) outpaced import prices (+1.3%). Mining commodities drove the rise in export prices. The depreciation of the Australian dollar contributed to the increase of import prices
• The household saving ratio declined from 7.1% to 4.5%, the lowest level since September 2017. Another red flag that signals consumers are digging into savings to counter the cost of living and mortgage pressure.

Afternoon report

Materials sector

The Materials sector, which fell 6.90% in February, led today’s rebound supported by the strength of Chinese PMI data.

• Beach Energy added 1.95% to $1.45
• BHP added 2.5% to $46.33
• BlueScope Steel gained 3.67% to $19.67
• Fortescue added 2.66% to $21.97
• Mineral Resources added 4.32% to $86.13
• Rio Tinto added 2.63% to $119.81
• Santos climbed by 1.14% to $7.08
• Viva Energy added 0.83% to $3.04
• Woodside Energy extended its post-earnings report gains, adding 2.21% to $36.71.

Consumer-facing stocks

Consumer-facing stocks have fallen as today’s GDP data showed that consumers are now in belt-tightening mode.

• Blackmores fell 2.07% to $77.72
• Domino's Pizza fell to a fresh cycle low of $48.05 extending its fall from the $167.15 high from September 2021
• Endeavour Group fell 2.2% to $6.68.

Financial sector

The big four banks have also fallen for the same reason outlined above, a development that will further dampen the appetite for credit.

• ANZ fell 1.3% to $24.33
• CBA fell 1.23% to $99.45
• NAB fell 1.9% to $29.44
• Westpac fell 2% to $22.09.

ASX 200 technical analysis

Earlier this week, the ASX 200 reached the upper echelon of the 7200/7000 support band we have targeted since late January. Providing this support level holds, we expect to see a recovery towards the 7400/7600 resistance area.

ASX 200 daily chart