Australian Economy Slows as Rate Hike Odds Soar
Australia's economy experienced a slowdown in the second quarter due to higher borrowing costs and pricey fuel, according to data from the Australian Bureau of Statistics. The real gross domestic product (GDP) rose by a moderate 0.4% in the second quarter, just above market forecasts of a 0.3% gain.
Annual growth dropped to 2.1%, down from 2.5% previously, but still above the Reserve Bank of Australia's target of 2%. Consumer inflation eased to 3.5% in July, but remains above the central bank's target band of 2-3%. The trimmed mean measure stayed stubborn at 3.6%.
The economy is cooling as expected, but inflation is still running hot. Business investment fell by 0.5%, following a surge in the first quarter, while net exports added 0.1 percentage point to growth. Household consumption contributed 0.2 percentage points, driven mostly by purchases of electric vehicles.
The market responded to these numbers by boosting the odds of another rate hike from the Reserve Bank of Australia at its September policy meeting to 57%, up from 48% before.