Updated June 04, 2017 11:58:46

Photo: The economy looks to have slowed in the first quarter, but has it stopped? (ABC News; Michael Barnett)

There has been plenty of economic news floating about, and not much of it uplifting.

Nonetheless, there is likely to be cause for a bit of high-fiving this week as Australia finally overtakes the Netherlands for having the longest recession-free run on record.

Even if GDP shrinks when the Australian Bureau of Statistics drops the numbers on Wednesday, it won't be two consecutive negative quarters, thus a recession dodged again, as it has for 103 quarters in succession.

The Dutch managed 102 before their luck ran out, clobbered by the GFC.

Australia's effort is undoubtedly impressive, although the Romans — who at one stage churned out around a third of global GDP — China's Qing dynasty, and perhaps the wealthiest of the lot, the Mughals of India, tended to enjoy economic expansion in terms of decades, if not centuries, rather than humble 3-month blocks.

Economy should grow ... just

Still, with a few partial components of first quarter (Q1) GDP to come out before it is all cobbled together for Wednesday's release, the general view is the economy may have done just enough to avoid the ignominy of shrinking.

Company profits (Monday) shot the lights out in the previous quarter, up 20 per cent, as the miners regained their mojo.

That is unlikely to happen again, but the forecast 5 per cent rise in Q1 would be more than respectable and a positive for GDP.

Inventories (Monday) should grow at a similar pace to the previous quarter, and all up make little or no contribution to a change in GDP growth.

Net exports are an entirely different matter.

Export volumes have been flat and imports have risen strongly, with the net result likely to be quite a drag on GDP, having propped it up previously.

The current account (Tuesday) may show the first surplus since 1975, but if it does, it will be pretty narrow.

While there have been record trade surpluses racked up during the quarter, that has been offset by a widening net income deficit. Statisticians are holding their collective breath on the outcome.

So taking all that into account, UBS economist Scott Haslem says GDP will slow to just 0.2 per cent growth over the quarter.

"[The] risks are tilted to the downside, seeing the year-on-year [figure] drop to just 1.5 per cent, the weakest since the GFC," Mr Haslem said.

ANZ's Felicity Emmett is even less enthusiastic, tipping GDP growth at 0.1 per cent.

"This could easily become negative, however, with the soft first quarter capex data already threatening such an outcome," she said.

It will be close either way, although the NAB is out on a limb somewhat, already calling a 0.1 per cent contraction.

If that is correct, and the impacts of Cyclone Debbie drag down Q2, then the new record for a modern economy free from recession may be ruled off at 103 quarters.

RBA on hold

The Reserve Bank will be meeting (Tuesday) ahead of the GDP numbers, but they are no doubt wary about a slowing economy adding to their disparate concerns of an over-cooked property market, faltering consumer spending, as well as low inflation and wage growth.

With these conflicting issues in mind, the RBA will most likely stay on hold for the tenth consecutive month.

"The RBA will likely also conclude that it's way too early to declare victory in its efforts to slow the Sydney and Melbourne property markets and recent strength in employment and business surveys also support the case to remain on hold for now," according to AMP's Shane Oliver.

"However, the chance of another rate cut by year end is steadily rising — growth looks like it will come in well below the RBA's forecasts thanks to weak consumer spending and business investment along with slowing housing investment and subpar growth and record low wages growth is likely to keep inflation lower for longer too."

Dr Oliver believes the softening in the Sydney and Melbourne property markets give the RBA flexibility to cut again if needed.

"The money market's implied probability of a 20 per cent chance of a rate cut by year end is way too low — it should probably be around 45 per cent," he said.

ASX poised to open higher

Local investors do not appear to be too concerned about the economy having slipped into reverse, after all it is all so last quarter.

Futures traders were much more impressed by the three big Wall Street indices — S&P 500, Dow Jones and Nasdaq — all closing at record highs.

The ASX SPI 200 points to a modest rise on Monday.

Globally, the UK may hold the gravest attention for anxious investors this week.

There is another incomprehensively awful terrorist attack to deal with, although previously such things have been stoically ignored by markets.

Polls in the UK elections are getting tighter. The betting still points to a Conservative victory, but a pyrrhic one in nature.

Having called the surprise election, the margin may be too narrow for comfort, which could cost PM Theresa May her job.

A hung Parliament, risks delaying Brexit negotiations.

Over the ditch, things are going well for new President Emmanuel Macron and his nascent REM party, who look likely to dominate this week's first round of legislative elections next weekend, and even win a majority in the lower house run-off in a couple of weeks.

In China, trade (Thursday) is expected to show both domestic and external demand is weakening, while inflation (Friday) will continue to be pretty low.

The US is not loaded with interest, although the wildcard could be former FBI chief James Comey's testimony before the Senate Intelligence Committee (Thursday).

It might just bring political risk back to the spotlight and risk delaying fiscal and tax reforms, yet again.

Australia

Overseas

Topics: stockmarket, currency, economic-trends, australia, european-union, united-states

First posted June 04, 2017 11:54:40