SCOREBOARD: Hard yards

The US and eurozone continue to enjoy a run of good data, but a falling Aussie dollar is driving divisions at home.

Friday’s session was fairly lacklustre with US stocks pretty much flat, weaker in Europe (down about 0.3-0.6 per cent), and commodities all softer (0.1-0.2 per cent). For the globe it was just another week: a lull in this bull market that is in its fifth year. The only significant oddity was that commodity prices aren’t rallying as well – especially given the strong fundamental support and the absence of any broad-based supply surge.

So for the week US stocks are off something like 0.9 per cent, which is nothing really, and gold is actually up about $25, with crude down about $1.8 or so to $94.15.

The global dataflow itself again shows this acceleration in operation – especially in the US. Core durable goods orders (excluding volatile items) rose 1.2 per cent in April after a 0.9 per cent gain the month prior – nearly three times the market expectation.

Similarly over in Europe, while the eurozone itself bounces around a modest recession, there are continuing signs of improvement. The latest was from the German IFO survey which rose to 105.7 from 104.4 – well above the average of 101.

Things are continuing to improve, not that you would know about that here. In Australia we’re all getting ready for another recession. The determination of some people is incredible. Alarmists run around frantically telling anyone who will listen that we are doomed unless the dollar comes down sharply, and we are headed for a deep recession.

This is nonsense, although I don’t discount the possibility of the country talking itself into recession – something Reserve Bank Governor Glenn Stevens has noted in the past. The biggest risk here is that we talk ourselves into recession and for some reason there is no shortage of people who are prepared to do the work here, to put in the hard yards. Far too many business commentators and economists are more than willing to, and have been for many years. When the data shows the absurdity of their arguments they just swap hats, as if they weren’t being alarmist in the first place. Then they switch back to alarmism as soon as they get the chance.

Note one thing: the Australian dollar has come down quite sharply. Not due to the actions of any of our policy makers I might add, and against that backdrop of consumer confidence having slumped and Aussie stocks down nearly 4 per cent for the week in a sizeable underperformance.

It’s a national embarrassment that the grand answer to everything – from some unions, from some of our industry supremoes, the government etc. – is for the Reserve Bank to slash rates to lower the dollar. The problem of course is that a lower Aussie dollar is not associated with economic strength. The simple fact is that when the economy performs well, our dollar strengthens. When it doesn’t, or the globe weakens etc., our dollar slumps.

A weak exchange rate is nothing to celebrate here, people, and those who continue to push for a weaker dollar need to realise this. They need to smarten up and stop damaging the country for the benefit of a small few.

Capex intentions are released for Australia this week and after last quarter's result I’m not hopeful about the discussion that will follow. Last quarter’s result continued to show that capital expenditure would surge over the next two years, yet the commentary associated with the data was all about how it showed the end of the mining boom – which it didn’t. I’m at a loss for that. There is no quality control, it seems, and you can say anything these days.

For this quarter, the consensus is that capex increased modestly, and there are no significant changes expected to last quarter’s estimates. Remember these showed continued strong growth in capex for this year and next.

Not much outside of that – building approvals here, and globally we see data like Chinese industrial profits today, US house prices tomorrow and another estimate of US GDP on Thursday.

Adam Carr is a leading market economist.

Follow @AdamCarrEcon on Twitter.

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