What's next for the ASX 200 after weak GDP results?

The ASX 200 trades 53 points (-0.63%) lower at 8441 at 1.00pm (AEDT).

Impact of Q3 GDP on the ASX 200

The release of another quarter of subpar economic growth has weighed on the Australian stock market today, knocking the ASX 200 away from yesterday’s record high.

Australian gross domestic product (GDP) increased by 0.3% in the September quarter of this year for an annual rate of 0.8%. While the Australian economy grew for a 12th consecutive quarter, growth has continued to slow since September 2023. This quarter, government spending and public capital investment were the main drivers of GDP growth.

Detailed economic indicators

• Per capita GDP growth: fell by 0.3% quarter-on-quarter (QoQ). It was the seventh consecutive quarterly fall in per capita GDP and the longest stretch of negative growth on record, as the 'per capita recession' deepened
• The household saving-to-income ratio: rose to 3.2% as a 1.5% rise in gross disposable income outpaced a rise in nominal household spending of 0.6%
• Household spending: was flat in the quarter. Essential spending fell by 0.1%, led by a strong fall in electricity, gas, and other fuels (-16.7%). Discretionary spending rose by 0.1%, led by clothing and footwear (+2.2%). Spending by Australian travellers overseas also contributed to growth in tourism categories, including hotels, cafes and restaurants, and recreation and culture
• Inventories: detracted 0.4 percentage points from growth in the September quarter after detracting 0.3 percentage points in the June quarter
• Net trade: contributed 0.1 percentage points to growth as exports grew by 0.2% and imports fell by 0.3% this quarter
• Government spending: rose by 1.4% for a second consecutive quarter. State and local general government expenditure (+2.2%) led the rise as additional state-based energy bill relief schemes were implemented in the quarter. National non-defence expenditure (+0.9%) also contributed with rises in employee and non-employee expenses, as several large agencies had received additional funding to improve and expand service delivery required to meet demand.

RBA’s outlook and market implications

Today's soft GDP numbers reflect the impact of the Reserve Bank of Australia's (RBA) restrictive monetary policy settings, aiming to rebalance demand and supply to tackle stubborn inflation. The RBA's latest forecasts from the November statement of monetary policy show an expectation that growth will pick up to 1.5% by December 2024 before climbing to 2.3% by June 2025.

However, today's data shows the growth trajectory diverging further from projections, casting doubt on the RBA's hopes for a smooth landing. With no RBA interest rate cuts on the horizon just yet, all eyes are on whether this week's boost in retail sales for October was a one-off event or if it signals a more sustained improvement in consumer and business confidence.

AU GDP figures reflect declining growth trend

2023:

• First quarter (Q1): 2.4%
• Second quarter (Q2): 2.1%
• Third quarter (Q3): 2.1%
• Fourth quarter (Q4): 1.5%

2024:

• Q1: 1.1%
• Q2: 1.0%
• Q3: 0.8%

Reflecting today's soft growth number, the chances of a 25 basis point RBA rate cut in April 2025 have risen to 80%, with a cumulative 50 basis points (bp) of RBA rate cuts priced by September 2025.

RBA output growth, unemployment and inflation forecasts chart

ASX 200 technical analysis

Following the ASX 200’s sequence of higher highs over the past six weeks, we have redrawn higher our trend channel resistance.

To that effect, the ASX 200 needs to see a sustained break above trend channel resistance, currently at around 8495, to signal a more impulsive move higher is underway. Otherwise, we expect to see more of the two-step forward, one-step back type price action viewed since September.

On the downside, a sustained break below 8300 would be the first indication that the ASX 200 may have topped and that a deeper decline is underway.

ASX 200 daily chart

• _{Source: TradingView. The figures stated are as of 4 December 2024. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}