GDP

GDP was stronger than expected at 1.2% in Q2 (median 0.9%), for growth of 3.3%yoy. There was a sharper acceleration in domestic final spending, with real domestic final demand growing 1.3% in Q2 and 5.3%yoy. Dwelling investment and net exports also contributed strongly to growth.

This was the fastest level of growth in three years and the annual growth rate has now rebounded to it's long term average of 3.3%. So much for the recession we didn't have.

Household spending lifted 1.6% showing consumers, as well as miners, have been driving our economy away from the brink.

Despite these figures NAB's expectations for the next rate hike is early 2011 as they expect some moderation in growth through the second half of the year. If capacity constraints emerge however putting upward pressure on the Oct 28 CPI release then all bets are off.

Strength emerging overnight in the US, combined with the GDP figures, have resulted in interest rate futures being sold off pointing to higher wholesale yields today.