Market Watch, Sept 15

Australian data remains rather mismatched. Consumer confidence remains well behind business confidence; wage growth is not catching up on employment growth; and growth forecasts are expanding but retrospective data isn’t.

On top of this there was further talk of rate rises in 2018 and 2019, with inflation most likely to return to trend in 2018 while long-term growth will move towards 3 per cent.

In addition, the ABS released its household expenditure survey which showed that four in 10 Australians are registering some form of financial stress and that 59 per cent of the average Australian’s weekly wage now goes into basics – housing, education, energy, food and health – and that discretionary spending is sliding.

Data of the week

Business conditions and confidence: Conditions hit a new high, up one point to 15, which is described as highly attractive. Yet confidence plummeted due to events like North Korea, government intervention and energy instability.

Also, for the first time, the NAB survey asked what were the biggest drags and promoters of confidence. Here are the drags:

(Source: NAB)

Consumer confidence:

For the 10^th consecutive month the Australian consumer remains pessimistic despite a 2.5 per cent jump in the survey month-on-month. The cause for the pessimism hasn’t changed for 10 months either with household finances, interest rate changes, housing affordability, and energy prices still an ongoing issue.

The Westpac survey also found that though consumers were more positive on employment, wage growth was not expected to increase in the coming months. Considering the data from the business survey, the pessimism makes sense.

Australian employment:

There was a huge surge in employment in August. According to the ABS, Australia added more than 54,200 jobs in August with 40,100 full-timers and 14,100 part-timers.

It’s hard to justify this figure as a crude calculation suggests this is the equivalent on the Non-Farm Payrolls of adding 726,000 in one month.

However, looking at the trend figures, Australia added 27,100 in August, which continues the trend in employment over the past year. So far, the Australian economy has seen 307,000 jobs added in 2017 and it’s on track for its best year since 2005.

Unemployment remains solid at 5.6 per cent and the participation rate is on the rise. This is what we should expect considering forecasts and expectations for the Australian economy.

However, the catch remains wages and hours worked are still sliding, suggesting wage growth is still flatlining.

The mismatch continues.