By Peter Switzer
If you look at some economic measures, you’d see that the Australian economy has slipped a gear into a slightly slower pace of growth. Reading other indicators, our economy continues to impress. In fact, professional economists say the data is mixed. Even so, the Reserve Bank has quietly stepped away from its 3% growth expectation for 2017, though it hasn’t gone too negative on us.
A great number
Our last reading from the Australian Bureau of Statistics (ABS) on how we’ve been growing was a great 1.1% number for the December quarter. If we were in America, it would be annualised (or multiplied by four) and we’d be calling it a 4.4% result. That would be huge in the USA, where, in Trumpland, they’re only producing 2% growth rates!
Of course, the September growth number was a shocker, coming in at minus 0.5%. It was, however, a rogue one-off — thank God!
And the latest show-and-tell?
For us here is Oz, here’s what’s happening:
- The CoreLogic Home Value Index of capital city home prices rose by 1.4% in March and was up 12.9% over the year.
- The NAB business conditions reading was the best in nine years! It went from 9.3 to 14.2 in March. The long-term average is only 5.
- Business confidence slipped from 6.7 to 6.1 but that’s still a solid result. The long-term average is 5.8.
- Consumer confidence has been disappointing but the ANZ/Roy Morgan reading for the week of April 11 was up 3.3% to 114.8, which beats the average (since 2014) of 113.2.
- There were 105,410 new vehicles sold in March, the highest for any March month and 0.9% higher than a year ago.
- The Performance of Services index rose by 2.7 points to 51.7 in March, edging closer to the 8½-year high of 54.5 in January. Any number over 50 means expansion.
- The Performance of Manufacturing index eased from 15-year highs, down by 1.8 points to 57.5 in March. This was the sixth consecutive month of expansion.
- Total household wealth (net worth) stood at a record $9,404.5 billion at the end of December 2016, up $328.1 billion (or 3.5%) over the quarter – marking the largest quarterly increase in net wealth in seven years.
- Job vacancies rose by 1.8% to 185,600 in the three months to February – a 6-year high. Job vacancies are up 7.3% on a year ago.
- The number of passengers on the Sydney-Melbourne route rose in January, up 1.6% on a year ago. The Sydney-Melbourne route is a key measure of business activity.
- Private sector credit rose by 0.3% in February after a 0.2% gain in January. Annual credit growth of 5% is near 3-year lows.
- The Commonwealth Bank Business Sales Indicator (BSI) – a measure of economy-wide spending – rose by just 0.1% in trend terms in February, the slowest growth in two years.
- The trade surplus lifted from $1,503 million to $3,574 million in February.
- In trend terms, exports are up 30.9% on a year ago – the fastest pace in eight years.
- Unemployment rose from 5.7% to 5.9% in February but this was CommSec’s Craig James’ view on the figures: “It would be easier to accept the latest jobs data if it lined up with other evidence. But it doesn’t. There have been healthy business surveys in recent months, with the NAB business conditions index hitting 9-year highs in January. Mining prices have lifted, the agricultural sector is buoyant, tourist arrivals are at record highs and more homes are being built than ever before. Certainly leading indicators like job ads are pointing higher rather than lower. And low real unit labour costs give employers plenty of reasons to be taking on staff.”
Pessimist becomes optimist
Sure, the business investment and wages story, along with retail numbers, aren’t great. That’s why I said the data is “mixed”. However, Perpetual’s Head of Investment Strategy, Multi Asset, Matt Sherwood has us growing close to 3% this year. Matt has been negative for about five years, so it’s great to see he has been won over to the optimists’ story!
What’s the overseas story?
The USA is growing strongly. Europe is surprising economists with its growth, and even Japan is showing some signs of economic life for the first time in donkey years! Meanwhile, China is a surprise package, defying doomsday merchants, who have been tipping Armageddon for about five years. And then there’s the Trump factor, which has really buoyed both stock market and economic expectations.
What’s the lesson here?
Have faith! We’re heading in the right direction, despite there being volatility for economic readings and stock prices.
Peter Switzer is the founder of the Switzer Super Report, a newsletter and website for self-managed super funds.