Following a number of data drops confidence has been wobbling a tad, just when the Reserve Bank thinks the economy is good enough not to need another rate cut.
And yesterday, we saw the latest employment and unemployment numbers that potentially could add to, or take away from, the small concerns that have become bigger since we saw the September economic growth result of minus 0.5%, which took our annual growth down from 3.1% to 1.8%.
Interestingly, the US’ annualised growth for the September quarter was looking like 3% but the December quarter has been downgraded from 2% to 1.8% by a consensus of US economists.
Taking stock of the economy
Back home, as the December quarter is nearly over, I thought I’d do an eco-check to see how we’ve been tracking for that quarter. I must say I have been seeing some negatives that weren’t around earlier in the year. That said, there are positives, so let’s take stock and I’ll rate each fact with a ‘good or bad news’ tag. Here goes:
- Employment rose by 9,800 in October, after falling by 29,000 in September (previously reported as a fall of 9,800 jobs). Full-time jobs rose by 41,500, while part-time jobs fell by 31,700. (Good ✔)
- Hours worked rose by 0.9% in October to record highs – the fastest growth in five months. Hours worked are up by 0.9% on the year. (Good ✔)
- The unemployment rate was steady at 5.6% in October. It was really 5.58%, which was the best number in 3½ years! (Good ✔)
- The weekly ANZ/Roy Morgan consumer confidence rating rose by 3.2 points (2.8%) to a 10-week high of 118.6 in the week to December 4. (Good ✔)
- The Westpac/Melbourne Institute survey of consumer sentiment fell by 3.9% in December to 97.3. The confidence index is down 3.5% on a year ago but the survey was conducted between the 5th and 10th of December, so the negative economic growth news was around then. (Bad ✕)
- The NAB business conditions index eased from +6.6 points to +5.3 points in November (long-term average +4.8 points). (Bad ✕)
- However, the NAB business confidence index rose from +4.3 points to +5.0 points with the long-term average +5.8 points. (Good ✔)
- Job advertisements rose by 1.7% in November to 4½-year highs and are up 6.1% on a year ago. (Good ✔)
- New motor vehicle sales totalled 98,937 in November – a record for a November month and up 0.3% over the year. (Good ✔)
- Retail sales rose by 0.5% in October to be up 3.5% over the year – a 5-month high. (Good ✔)
- The CBA’s Business Sales Indicator (BSI), which is a measure of economy-wide spending, lifted by 0.4% in trend terms in October, matching the gain in September. It was the biggest back-to-back increase in spending in nine months. (Good ✔)
- While business investment has fallen because of the dying mining boom, over the last six months, investment expectations have lifted by 17.1%, which could be good for the December quarter. (Good ✔)
- The CoreLogic Home Value Index of capital city homes rose by 0.2% in November and was up 9.3% over the year. Prices rose in all capital cities except Melbourne (-1.5%) and Canberra (unchanged). Regional prices were only up 1.4% in the year to October. (Mostly good ✔)
- The Performance of Manufacturing index rose by 3.3 points to 54.2 in November. A reading above 50.0 indicates that the sector is expanding. (Good ✔)
- Coal and iron ore prices have surged in the December quarter. (Good ✔)
- The stock market is up 2.6% for the quarter and 8.3% since Donald T won! (Good ✔)
And the verdict is…
So my quick good-v-bad count is: 14 goods beat two bads. Even if I’ve missed an odd bad, the story does look largely positive for the December quarter and next year.
So, what happened with the November jobs report?
Well, unemployment rose from 5.6% to 5.7% but this came from a rise in the participation rate, which is often seen as a good sign for an economy.
Employment was up 39,100 in November but over the year employment growth was 0.7%, which is the weakest in two years. However, full-time growth over the past two months is the largest back-to-back rises since March 2011.
Also underemployment was down from 8.7% to 8.3% and Queensland had some promising employment signs, which was a welcome development.
The future outlook
Of course this is looking back, so I like this from Savanth Sebastian at CommSec:
“The outlook is certainly more encouraging. Job vacancies are holding near 4-year highs, in addition anecdotal evidence suggests activity levels amongst the business sector is lifting. The strength in commodity prices is also a positive and may be behind the strength in Queensland jobs growth. Almost 39,000 new jobs were created across the Queensland economy in November. It is still early days but the latest result is certainly more upbeat.”
Also, a lot of the bad stuff we’ve been seeing lately has actually come from the September quarter but the data has surfaced in the December quarter.
This won’t surprise many regular readers, but I think the pessimists on the economy could be trumped by the optimists in 2017.
Peter Switzer is the founder of the Switzer Super Report, a newsletter and website for self-managed super funds.