Yahoo Finance 
The case for economic negativity increases, but only just
By Peter Switzer
In case you missed it, the run of economic data has been mixed, to put it fairly, but as someone who believes in the power of positive thinking, as an economist I can’t run away from objectivity.
Right now, I can’t ignore predictions based on the recent numbers that next week’s look at the March quarter for economic growth could be slightly negative. Not helping will be the impact on GDP from Cyclone Debbie, but even without damn Mother Nature, the economic growth result was not going to be flash. And this news comes when the stock market has been falling, albeit not dramatically. And one fund manager is so spooked, he’s handed his clients’ money back!
And acting as an ominous black cloud over all of us are warnings that a home price day of reckoning looms.
Also read: Australia Home prices fall – for the first time in 17 months
The economic scoreboard
Given all this, I thought I’d do an economic update on what the data has been telling us but, before that, let me give you the consensus view on these scary issues.
So what’s the latest on the economic scoreboard? Have a look at this:
Dwelling approvals rose by 4.4% in April after falling by 10.3% in March. (Good sign)
The ANZ/Roy Morgan consumer confidence rating rose by 1.5% to 112.2 in the week to May 28 – the strongest reading in three weeks. Confidence is down 0.9% over the year and remains below the average of 113.2 since 2014. (Good sign)
The NAB business conditions index rose from 12.3 points to 14.3 points in April, a 9-year high. The business confidence index rose from 6.5 points to 12.9 points – a 7-year high. (Great signs!)
Building inflation rose by 0.9% in the March quarter. The annual rate of construction inflation rose from 1.8% to 2.6% – an 8-year high. (Good sign)
Total new lending commitments (housing, personal, commercial and lease finance) rose by 7.7% to a 4-month high of $72.9 billion in March. (Good sign)
In trend terms, loans for alterations & additions hit 6½-year highs in March. (Good sign)
Commercial finance rose by 13% in March, after rising 2.3% in February and is up 7.1% over the year. (Good sign)
Employment rose by 37,400 in April after rising by 60,000 in March. Economists had tipped a 5,000 increase in jobs. (Good sign)
Unemployment fell from 5.9% to 5.7%. The participation rate was steady at 64.8%. (Good sign)
Job advertisements rose by 1.4% in April to 169,268 ads – a near 6-year high.
Tourists from China and Hong Kong rose to a record 1,488,400 over the past year — up 12.1% over the year. (Good sign)
The wage price index rose by 0.5% in the March quarter to be up 1.9% over the year. (Bad sign)
Annual underlying inflation remains below wages at 1.7 per cent. (Good that real wages are rising but it’s too slow)
Construction work done in the March quarter fell by 0.7%, to be down 7.2% on a year ago. (Bad sign)
Also read: How CEOs reacted to Trump’s exit from Paris climate agreement
Good outweighs the bad
As you can see, the good to great signs still outweigh the bad signs but slow wage rises, uninspiring business investment numbers, worries about the housing sector and the expected bad economic growth number next week helps negativity trump positivity.
And the business investment figures on Thursday weren’t great and NAB’s economic team predicted a negative number for economic growth in the March quarter next week.
That said, the Bloomberg consensus thinks that guessed, negative number could really be plus 0.6%, so all I can say is “go the consensus economists!”
GDP watch
Meanwhile growth in the June quarter is expected to rise because there will be a lot of work included in GDP calculations to make good the bad stuff created by Cyclone Debbie. On the stock market, most of the smarties think any increase of the current sell off will be a buying opportunity because even negative fund managers now aren’t handing their money back and most expect a better second-half of 2017, both for the economy and the stock market.
As Macquarie’s Martin Lakos said this week on my TV show, the positive economic outlooks for the US, China and Europe will be good for stocks. Then you need to take into account good company earnings overseas.
The local story might be worse than expected but it still should be better than recent previous half-year results.
Slowing house prices
On housing, prices are starting to slow in Melbourne and Sydney but few expect Armageddon for real estate, as few experts expect a recession or a period of rapidly rising interest rates. I know household debt is historically high but provided we don’t see big job losses or excessive demands from lenders on mortgage-holders, then we could just muddle through. And if we can get some better growth happening, then we might look back at this time and ask: “Why were we such worrywarts?”
Remember we are great muddlers with our economy, dodging a recession for over 25 years, and soon we’ll break the world record for growth!
Peter Switzer is the founder of the Switzer Super Report, a newsletter and website for self-managed super funds.
