GDP growth does appear to have accelerated in the third quarter but, after a year of below potential growth, the economy is still struggling to shake off the effects of the stronger dollar and the mining-related investment slump. Other parts of the economy are failing to take up the slack. The biggest disappointment recently has been the weakness in underlying retail sales, which have barely increased at all over the past three months. The fundamentals supporting consumption are solid enough, with employment growing at a solid pace, hourly wage growth still climbing (albeit more slowly), household wealth rising and consumer confidence still buoyant. Accordingly, we do expect a better showing from sales in the fourth quarter. But overall GDP growth is probably going to be a modest 2.0% to 2.5% annualised.
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