This was not the week from economic hell

September 10, 2015, 3:59 pm Peter Switzer Yahoo7 Finance

Despite how this week's economic data has been portrayed, the devil is in the detail, argues Peter Switzer.

This week was poised to be an important one for working out what was happening to our economy, with the usual suspects in the media making too much out of bad news while doing their best to ignore signs that possibly point to an improving economy.

In case you’re not an economics junkie, the view on our economy is split between those of us who think we’re on the improve, (albeit too slowly for what most of us would like), and the doomsday merchants who think we’re on the verge of a recession.

There are professional economists from financial institutions who hold this view, but alternatively there are others who agree with me, including the likes of the Sydney Morning Herald’s Ross Gittins and the Reserve Bank, that our economy is slowly on the mend.

Those with this latter view don’t think more interest rate cuts are needed.

Also read: Are we growing fast enough to create jobs?

For and against

On that basis, every week of economic data either builds the case for or against another rate cut and this week has been a biggie.

To be honest, it has not worked out as positively as I would have hoped, but realistically I never expected much from both business and consumer confidence readings after the month of August we just lived through.

Depending on how you access your news, you might have thought this was the week from economic hell.

If you operate off headlines, you might know that on Tuesday, NAB’s business confidence dived 3.5 points to 0.7 in August.

Optimists just shade pessimists, but it was disappointing.

And then on Wednesday, we learnt the closely watched Westpac consumer sentiment reading did a hissy fit!

The reading dropped 5.6% in September to 93.9, which told us that consumers and business were not doing anything to help the case for the economy heading up.

Devil in the detail

But might there be some devil in the detail, or an angel in the appendices that gives hope to the optimists’ case?

Well, yes and so let’s review the week’s data. So on Monday we saw the ANZ’s job advertisement series, which adds up job ads in major newspapers around the country and on the Internet.

The news here was that job ads rose by 1% in August after falling by 0.5% in July.

These forward indicators for the economy have risen in 12 of the last 14 months.

Newspaper advertisements rose by 0.8% in the month, but the far larger component of internet ads rose by 1%.

Job ads are up 8.7% on a year ago and in trend terms, these ads rose by 0.4% in the month, which was the 21st straight gain, to be up 10.1% over the year.

In case you need a view — that’s a pretty good omen for the economy going forward.

[ read: Is the worst of the market slump over?]

Business confidence down, business conditions up

Now to Tuesday, and business confidence dived, but this up and down measure of feelings of business owners and managers had just lived through a big sell-off of the Chinese stock market, a 4% drop in our stock market and weaker than expected Chinese economic data.

And our own economic growth was a weak 0.2% for the quarter and 2% for the year.

This led to scary headline, and it was no surprise that both business and consumers had confidence problems.

However, the NAB’s business conditions reading was another story. This measures what business is thinking about what it’s like to be in business right now, and this stat was a lot rosier than the confidence measure.

While business confidence went to a six-month low, business confidence shot up to a 10-month high!

The number went from a good 6 to a pretty impressive 10.7 but in New South Wales, our biggest economy, went from a good 9 to a huge 22!

Business in focus

For people who like details, the NAB business survey revealed that the index of trading conditions rose from 12.1 to 19.8; employment rose from minus 1.2 points to minus 0.7 points; profitability rose from 7.5 points to 11.9 points; forward orders rose from 2.6 points to 5.0 points, which all points to a great business story emerging.

This is all good reading for those of us who want to think our economy is on the improve.

And here’s what the NAB team reported: “Most industries reported a rise in business conditions, but a fall in confidence.

The retail industry saw the largest rise in conditions (up 13 to 17 points), and has been positive for a number of months, but had a large decline in confidence (down 8 to 1 point).

Manufacturing was the only industry to record a fall in conditions (down 7). Service sectors continue to be the standout performers, although construction currently has the highest confidence index (up 10 points in August to 6).”

So inside the black cloud of confidence was a silver lining of a damn good story for business conditions adding to the positivity coming out of job ads.

Also read: How the economy can save this government

Unemployment rate drops

But the economic week didn’t end there with Thursday bringing the latest jobs report.

So, what did the stats on employment and unemployment bring?

Well, unemployment decreased from 6.3% to 6.2% and employment increased by over 17,400 new jobs in August, which was about 7,000 more than expected.

Those looking for bad news will say the participation rate decreased slightly, but for the optimists who thinks the economy is gradually improving this was a good result.

Let’s hope the media gives it a fair airing. Now that would be heavenly!

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