---- by Patricia Kuo ----

SYDNEY (FWN) - Third quarter GDP is expected to grow 0.5-1.3 pct from the June quarter and 1.9-2.4 pct year-on-year, driven primarily by strong housing sector activity and private consumption, economists said. They said the impact of the global economic slowdown will become more apparent in the coming quarters despite the resilience of the local economy. In the second quarter, GDP was reported up 0.9 pct from the first and up 1.4 pct year-on-year.
National Australia Bank global head of market economics Tony Pearson forecasts quarter-on-quarter growth of 1.1 pct and a year-on-year gain of 2.2 pct, "driven primarily by recovering dwelling investment and adequate private consumption".
Private dwelling investment fell over the three quarters to March 2001 due to the introduction of GSTbut recorded a rise in the June quarter, he said. Data so far shows a further acceleration in the September quarter, with a rise of 8.5 pct.
"This is one sector which we believe will continue to make solid contributions to growth in the year ahead," Pearson said. There are also signs that the downturn in private business investment is bottoming out, with capital spending and construction spending data pointing to an increase in underlying private business investment of about 1.0 pct, which would make a 0.1 percentage point contribution to the September quarter GDP, he said.
"The concern with investment going forward is that, while it has stopped falling, it is not yet recovering strongly. It also may not yet be fully reflecting impacts from the September (11 attacks on the US)," Pearson said. In terms of private consumption, he said the fading of the GST 'shock,' lower personal income tax, additional GST compensation and lower petrol prices have all been supportive.
He expects private consumption to rise by 0.8 pct, contributing 0.5 percentage points to growth in the quarter.
Net exports during the quarter contracted, suggesting a contribution of minus 0.1 percentage points to GDP, he said.
"These data are unlikely to show much drag on growth from the events of September or from the global downturn but this will beg the question of whether these events will begin to exert a negative influence in due course and in turn whether there is sufficient economic momentum to carry the day," he said. ANZ Investment Bank economist Karen Pringle said the September quarter GDP is likely to confirm that the economy is still holding up well, posting growth of 0.8 pct over the three months to June and 1.9 pct year-on-year. "From data already released it is clear that retail spending has been strong and housing will have contributed positively to growt . Net exports were a minor drag on growth.
"On the downside, company profits appear to have fallen sharply, providing a drag on income-based GDP growth and suggesting companies are not as well placed as previously thought going into this global downturn," Pringle said.
CommSec chief economist Craig James expects to see September quarter GDP growth of 1.3 pct and 2.4 pct for the year-on-year figure, underpinned by household consumption and dwelling investment.
Westpac Banking Corp general manager of economics Bill Evans forecasts quarterly GDP growth of 0.9 pct and 2.2 pct year-on-year.
During the quarter, consumption was up 1.0 pct, dwelling up 8.0 pct and business investment rose 1.0 pct, which should give final demand growth of about 1.5 pct, Evans said.
However, net exports and inventories are likely to offset these gains to some degree. On the income side, employment has risen 0.2 pct and average earnings 1.3 pct which is positive but a contraction in profits make it likely that the income measure of GDP will be about 0.9 pct, Evans said.