GDP to look better than it really is

HEADLINE-GRABBING economic growth figures early next month will probably look good, but appearances can be deceiving.

Every three months there's a barrage of economic data that can dramatically change perceptions of the state of the economy.

It's a flurry of quarterly figures, culminating with the release of the national accounts and its headline gross domestic product (GDP) growth figure.

And it's just about upon us.

The national accounts are due on June 4, Wednesday week, and will cover the first quarter of this year.

The GDP growth number will most likely look just fine, even pretty good.

Economists already have some figures to plug into their estimates for the rise in GDP.

Retail trade and foreign trade data already published by the ABS show the economy was boosted by higher consumer spending and exports.

And imports likely fell, diverting spending power toward local businesses and also boosting GDP.

Taking just retailing and foreign trade into account, GDP would be up by about 1.2 per cent in the quarter.

That's only just shy of twice the 0.7 per cent average quarterly increase seen in 2013.

And it's about one-and-a-half times the long-run average of 0.8 per cent.

But it's not likely to end up so strong, and even then will overstate the economy's momentum.

Imports, judging by the monthly trade figures and price data from the ABS, have stopped rising.

Given the strong link between imports and overall spending, that implies weak or no growth in total spending in the economy, or domestic demand as economists call it.

The trade figures also suggest imports of capital goods fell even faster in the March quarter than in the previous three months.

And the great bulk of Australia's capital goods are imported these days.

That suggests business capital spending fell, dragging on growth in the quarter and partly offsetting those other positives from exports and retail trade.

Business capital spending figures from the bureau on Thursday next week should confirm what the import numbers are saying about what happened in the March quarter.

That report will also includes projections, based on the investment plans of the businesses surveyed by the ABS.

Those projections, extending out to mid-2015, should confirm that the long-awaited pickup in business investment outside the fading mining sector, essential for the economy's so-called "rebalancing", is still beyond the horizon.

In the meantime, not too much should be made of the strong-looking growth in the March quarter, at least to the extent that it's based on exports.

GDP growth is important because it generates employment.

And the current growth in exports is coming mainly from mining, where employment and investment are falling as the sector moves out of the investment phase and into the production phase.

So it will be a kind of hollow, jobless growth.

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