The economy grew at a much slower pace in the first quarter than at the end of last year as the withdrawal of economic stimulus, surprise weakness in business investment and sluggish growth in export volumes took some of the steam out of activity. The average measure of GDP rose 0.5% in the first quarter of 2010 from the fourth quarter 2009 and rose 2.7% from the year-earlier period, the ABS said.
Energy companies led a decline in US stocks on Tuesday, as BP's mounting troubles, including US civil and criminal investigations announced late in the session, rattled investors already worrying over a global economic slowdown and its potential impact on companies including Alcoa and Caterpillar.
The concerns ultimately outweighed better-than-expected reports on US construction spending and manufacturing that had boosted stocks earlier in Tuesday's session.
Manufacturing grew at a slower pace in May due largely to weaker new orders, production and inventories, a performance gauge produced by an industry group shows. Rising interest rates, weaker confidence on the back of global equity market losses and the ongoing debt crisis in Europe all combined to crimp factory gate output.
The Australian Industry Group-PricewaterhouseCoopers Australian Performance of Manufacturing Index fell 3.5 points in May from April to 56.3, above the 50.0 mark which separates expansion from contraction.
The RBA left interest rates unchanged in June saying its six rate hikes since October 2009 represent a significant adjustment to monetary policy, but it left open the prospect of a return from the sidelines within a short period of time saying policy is appropriate only for the "near-term."
The Australian sharemarket had a poor month in May, with the All Ordinaries Index falling 7.9% to close at 4,453.6 points. International markets were also down as fears of a Europe led debt crisis affected global financial markets.
The Dow Jones Index closed down 7.9%, the FTSE closed down 6.6%, the Hang Seng closed down 5.0% and the Nikkei 225 closed down 9.9% for the month.
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The current account deficit narrowed to a seasonally adjusted $16.55bn in the first quarter of 2010 from the fourth quarter of 2009, the ABS said. But the deficit on goods and services, in seasonally adjusted chain volume terms, widened by $1.5bn over the quarter, and is expected to subtract 0.5% from GDP growth.
US markets were closed overnight for the Memorial Day holiday, while markets in the UK were closed for the Spring Bank holiday. European stocks finished a quiet with a slight rise, as German stocks outperformed their Continental rivals in the first reaction to a downgrade of Spain by Fitch Ratings.
The Stoxx Europe 600 finished the day with a rise of 0.3% to 244.79, led by carmakers and technology-sector firms. Shares of Daimler AG rose 1.5% and shares of business software giant SAP rose 1.7% as the German DAX finished with a rise of 0.3% to 5,964.33.
US stocks fell on Friday, ending their worst month in more than a year as measures of consumer spending and Chicago-area business activity disappointed. Walt Disney, Bank of America and Cisco Systems were among the decliners.
US stocks surged on Thursday, posting their second largest gain this year as fears of eurozone contagion receded and investors flocked back to riskier stocks, lifting shares of technology companies including Intel and Microsoft. American Express also jumped, boosted by an analyst upgrade.