From JP Morgan:
"Indeed, beneath the surface...the economy grew at a decent clip. Gross national expenditure, for example, expanded at a trend-like 0.8%q/q, and final demand rose a healthy 1.3%q/q. Household spending was unexpectedly firm over the quarter (much stronger than the retail sales report had indicated), business investment bounced, public consumption spending rose strongly, and dwelling investment was much firmer than we had anticipated…
The household savings rate unexpectedly rose to 11.5% in the March quarter (from 9.7% in the last two quarters). Retail sales volumes had been flat over the quarter, so the surprise strength in household spending indicates that consumers are spending more on services and non-retail items (utilities, etc). Household disposable income boomed 3.6%q/q over the quarter, the biggest rise since the final quarter of 2008, when the government handed out wads of cash and the RBA slashed the cash rate as the global financial crisis took hold. Household tax payments were flat over the quarter, having risen more than 6% in each of the last two quarters.
Clearly, though, the sharp rise in the savings rate shows that households remain cautious about the future. This, of course, is a necessary -precondition for the RBA, in order to ensure that there is room elsewhere in the economy for the positive multiplier effects coming from the terms of trade and mining booms.
Indeed, the terms of trade bounced another 5.8% over the quarter – this is one of the big drivers of income growth across the economy. Broader price pressures in the economy were uncomfortably high, as the previously-released inflation data had indicated. The implicit price deflator for final consumption expenditure, for example, rose 1.5%q/q (the CPI rose 1.6%)."
