ASX200 edges higher ahead of Wednesday AU Q2 GDP release

Wednesday sees the release of Australia's Q2 GDP report at 11.30 am. The report predates current lockdowns in Sydney and Victoria, and because of this, the data is less valuable than usual.

Nonetheless, the release is expected to garner serious media attention locally because a heavy contraction in GDP in Q3 is already guaranteed due to lockdowns.

Should Wednesdays Q2 data also show a contraction, it will mean the Australian economy will fulfil the technical definition of a recession for the second time in two years; two consecutive quarters of negative GDP. 

This morning saw the release of some key inputs into Wednesday's GDP data. Q2 Company Profits were much stronger than expected (+7.1% vs. 2.5% exp), driven by strong commodity prices lifting mining profits. Partly offset by a further step-down in government subsidies in the quarter. 

However, Q2 Inventories rose less than expected (0.2% vs. 1.2% exp), bringing into question the strength of the rebuild following a sharp rundown in 2020 that will likely subtract from quarterly growth. 

The final partials drop tomorrow morning in the shape of Balance of Payments data, expected to show Net Exports fell in real terms, driven by a decline in export volumes that may subtract as much as 1.5ppt off GDP growth. 

For the record, the range of Q2 GDP estimates is from -0.1% to a more optimistic +1%. The wide range reflects the many moving parts that go into GDP, Australia's average expenditure, incoming, and production estimates. 

Turning to the charts, after falling from its 7632.8 high of Mid-August, the recovery from the 7429 low is viewed as the incomplete second leg (Wave b) of a three-wave corrective sequence. A break below the 7429 low would indicate that the third leg lower (Wave c) is underway towards trend channel support near 7320/00, which remains our preferred buying level. 

ASX200 Daily Chart

 Source Tradingview. The figures stated areas of August 30th, 2021. 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

Build your confidence risk free

More from ASX

Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.