It looks like the Australian economy was gathering steam in late 2016, potentially laying the foundation for a rebound in growth following the shock 0.5% contraction in the September quarter last year.
This chart from ANZ helps bolster that view.
It’s the bank’s “Stateometer”, a visual indicator on how states and territories are currently performing, using trends across 37 individual economic indicators, including business and household activity, the labour and housing markets, and trade to gauge how each is performing compared to historic norms.
Here’s how it works.
Any state or territory on the top half of the chart is growing above trend while anyone in the bottom half is growing below trend. On the bottom axis, anything on the left suggests that economic activity is slowing while anything on the right says its accelerating.
The bold symbols indicate where each one currently sits, with the lighter symbol where it sat in the previous month.
While many currently sit in the bottom left quadrant, indicating that growth is both decelerating and below trend, there has been an interesting development over the past month with many starting to shift to the right, indicating that activity levels are starting to improve.
It’s not much, and still suggests that the broader Australian economy remains sluggish, but it’s a small improvement nonetheless.
“A key theme in this month’s release is the improving momentum evident across Australia,” said Felicity Emmett and Giulia Lavinia Specchia, economists at ANZ.
“This mainly reflects the contribution of improving business conditions — which are lifting growth across the country — and rising commodity prices, which are providing some support for the mining states.”
On the NSW economy, Australia’s largest, the pair say that while growth continues to slow, “momentum seems to have stabilised on the back of a re-acceleration in the housing sector.”
For Victoria, currently the best performing economy across the country based on the December Stateometer, Emmett and Specchia say that solid labour market conditions continue to support growth.
According to the ABS, employment growth in Victoria was more than the entire economy combined last year, indicating that employment elsewhere, combined, actually fell.
No wonder the state is outperforming all others right now.
Elsewhere, ANZ said that activity in Queensland and Western Australia continued to expand at well below trend, although it “seems to be bottoming in both states likely supported by the pick-up in commodity prices”.
That was also replicated in the Northern Territory where activity continued to accelerate driven by a steady recovery in labour market conditions.
They also said that rising housing prices and improving labour market conditions provided support to economic growth in Tasmania while momentum in the South Australian economy was also improving led by a pick-up in consumer and business confidence.
With the Stateometer starting to show improvement, markets will get a read on how the entire Australian economy performed in the latter parts of 2016 when the ABS releases Australia’s Q4 GDP report in early March.
Many, including the RBA, suggest that economic growth will rebound smartly after the surprise decline in the September quarter.