Our economy could be at a positive tipping point and it’s not just because at long last we saw a ripping retail number. The other notable plus was the SMH actually reported the good news!
I’ve long argued that there has been excessive negativity about our economic outlook, and as Bob Dylan sung in his great Hurricane song, “the media, they all went along for the ride.”
To be accurate, the actual story was written by Swati Pandey at Reuters, the Fairfax team did sanction this positive headline: “Australian shoppers make a comeback, housing market resilient!” (That’s my “!” in there but who should be surprised?)
In case you missed it, retail data was released yesterday and here’s a short summary:
• Retail trade rose by 0.6% in February after rising by an upwardly-revised 0.2% in January (previous up 0.1%).
• Annual sales growth lifted from 2.1% to a 7-month high of 3%.
• Over the year to February, Victorian retail spending rose by 5.8% – the fastest rate of growth for over two years.
This is how Reuters reported the result: “Australian retail sales rebounded in February as shoppers spent on cafes, clothing and household goods, a tentative sign that consumers may be coming out of the doldrums and contribute to economic growth.”
Consumption, of which retail is pretty damn important, makes up 57% of our economic growth reading, so this could augur well for this crucial indicator for the overall health of the economy.
The subdued consumer has been worrying the Reserve Bank but as I’ve shown a number of times consumer confidence has been trending higher since last September, as the chart below shows.
“All industries saw rises led by household goods which added 1.1 per cent,” Reuters noted. “Clothing and footwear rebounded 1.1 per cent after two straight monthly falls. Cafes, restaurants and takeaway food grew 0.7 per cent while department stores bounced 1.5 per cent after declines in each of the preceding three months.”
A comeback for department stores is a nice shock for the retail system!
But it’s not just retail — housing is looking better than expected.
At first blush, the numbers don’t look great but you do need to delve a little deeper.
Council approvals to build new homes fell by 6.2% in February but they rose 17.2% in January, though they slumped 20.7% in December. Meanwhile, annual commercial building approvals stand at a record high of $47.6 billion.
This is how CommSec’s senior economist Ryan Felsman sees the all-important building sector: “The ‘old story’ was a boom in home building,” he explained. “The ‘new story’ is a lift in commercial building.
“Over the year to February, commercial building approvals hit a record $47.6 billion, up 17% over the year. And it’s not just offices being built, but schools, aged care facilities, factories and warehouses. In fact, approvals to build both education and aged care facilities are up more than 40 per cent over the year.”
Not surprisingly, this professional economy watcher tells us that “the outlook for the construction sector is very positive.”
The only fly in the ointment in recent times has been the share market and the confidence-sapping effects of the four Ts linked to the US Presidency — Trump, tweets, tariffs, tech-trashing.
Felsman argues that our economic story, partly explained above, should have been good for consumer confidence but the recent weekly readings have been more negative than the monthly readings shown in my previous chart.
“Aussie consumers have become more wary due to global issues,” he said. “Share markets have slid due to fears of a US-China trade war, Facebook’s data scandal and President Trump’s increasing twitter attacks on Amazon’s business practices.”
If Donald could just stop tweeting, we just might see a local economic recovery that all media outlets would be forced to headline!