Financial Betting: GDP and CPI Betting Tips

House Price Harry, the Hub’s financial betting expert, will be sharing his quarterly GDP and CPI tips.

New to the Exchange in 2020, markets for Australian GDP and CPI quarterly results are being offered. House Price Harry has drawn on his wealth of experience in the economic sector to share his thoughts and best bets for both markets.

Read his Residential Property Price Index betting analysis here.

Scheduled release date: 3 June 2020

The recent information flow for the sub-sets of data that feed into the GDP result suggests the impact of the COVID-19 crisis on the real GDP growth in the March quarter is relatively modest, with a range of offsetting factors at play.

In the March quarter, household consumption spending held up with booming spending in supermarket hoarding of toilet paper, pasta and rice, although this was partly offset by falls in spending in restaurants, cafes and pubs. In real terms, retail sales rose a moderate 0.7% which will add around 0.2 percentage points to GDP growth in the quarter. Exports were very strong through to March, with resources and agriculture remaining resilient while tourism and foreign student arrivals fell sharply.

Business investment was likely weak in the quarter but this could be countered by solid spending by the government, including on infrastructure. The net effect of these two variables is likely to be broadly neutral.

Based on available information, GDP growth is likely to be in a range of around 0.0% with risks evenly balanced. Up or down. The next few weeks will see the publication of further data which will feed into expectations for GDP when the data are released on 3 June 2020.

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Scheduled release date: 3 September 2020

The big hit to GDP from the COVID-19 shutdowns will be in the June quarter. The collapse in both business confidence and consumer sentiment points to a significant decline in economic activity. The RBA has cast is forecast to suggest GDP will “decline by around 10% in the first half of 2020” which includes the yet to be published March quarter result.

Many of the economists at the banks and other financial institutions are forecasting GDP to fall by somewhere between 5% and 10% which is a very wide range, But such are the uncertainties, an outcome even outside this range is possible.

Exports and government spending will likely be solid positive in the quarter but these will be swamped by a yet-to-be-confirmed slump in consumer spending and business investment.

With some early end to the lockdown and social distance rules unfolding, it is possible the decline will be less severe as some consumer spending, in particular, comes back. This is a clear upside risk to the data.

In the coming weeks and months, the data flow will help give some guide to the likely fall, in GDP in the June quarter.

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Scheduled release date: 27 July 2020

There are strong deflationary pressures at play in the June quarter which is likely to see the CPI fall by a record amount.

Not only is the economy in recession with sharp increases in the unemployment rate undermining the business sector but prices of many goods and services are sharply lower.

The fall in petrol prices, if sustained through the quarter, will slice around 1 percentage point from the CPI. Add to that the government policy to make childcare free and falls in dwelling rents and the debate among economists is how far the CPI will drop in the quarter.

The price of some items will increase. Fresh fruit and vegetable prices are higher, partly as an aftershock of the bushfires which undermined growing and there is some evidence the supermarkets have jacked up prices amid the recent panic buying. The overall effect of this will, however, be moderate.

There is a range of huge uncertainties in the CPI data. The price of airfares, international and domestic travel, cars and household equipment are all wildcards but in the end are likely to be weak.

The risks favour a large fall in the CPI in the June quarter, at this stage, the indicators point to a decline of more than 2.5%. One issue to watch will be any change in petrol prices – in recent days the global oil price has moved up which may mean petrol prices also rise during the course of the June quarter and will lessen the extent of the drop in the CPI.

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