Saturday, June 9, 2012
It followed that up with figures showing a lot stronger growth in employment in May than economists had been expecting.
Three months ago we were told the economy (real gross domestic product) grew an exceptionally weak 0.4 per cent in the December quarter and 2.3 per cent over the year to December - well below the ''trend'' (long-term average) annual growth rate of 3.25 per cent.
On the strength of this and other indications, economists were expecting growth in the March quarter of just 0.6 per cent and growth over the year to March of about 3.2 per cent.
Instead we've been told this week that growth in the quarter was more than twice that - 1.3 per cent. For good measure, the figure for the December quarter was revised up to 0.6 per cent, and for September it was raised 0.2 points to 1 per cent.
For the June quarter growth was left unchanged at 1.4 per cent, meaning growth for the year to March was a remarkable 4.3 per cent - way above trend.
Question is, can we believe it? Or, to put it more carefully, how literally should we take these figures? Well, I'm no statistical fundamentalist. Unlike many in the media, I don't assume the bureau's estimates (and ''estimates'' is the bureau's word) are God's immutable truth.
Its monthly job figures are subject to sampling error and human error. Its quarterly figures from the national accounts are produced before all the necessary information has come to hand, and so represent a first stab at the truth. As more reliable information comes in, the bureau revises its figures, gradually closing in on an approximation of reality.
I'm not convinced the economy grew as strongly as 1.3 per cent in the March quarter, and I won't be surprised to see that figure revised down in subsequent quarters. So I don't really believe the economy grew by a rip-roaring 4.3 per cent over the past year.
Were that to be true, you'd have expected stronger growth in employment over the period, even though it's been a lot stronger this year than it was in 2011, and the bureau has belatedly confessed that, due to human error, it overstated employment growth in 2010, then sought to quietly correct the problem by understating it in 2011. Not a smart way to protect your credibility, guys.
Even so, it's not possible to point to anything in this week's accounts that looks obviously dubious. And they're now showing a picture of strong growth in all four quarters bar December.
It's true, however, the accounts show a very mixed picture for different parts of the economy. The weakest part is home building. It contracted 2.1 per cent in the quarter and 6.2 per cent over the year to March.
Spending by the public sector is essentially flat in real terms as federal and state governments seek to get their budgets back into operating surplus.
Non-mining business investment spending is weak, while weather problems caused a fall in the volume of exports, and import volumes grew quite strongly. Net exports (exports minus imports) subtracted 0.5 percentage points from growth in GDP during the quarter and 1.3 points over the year.
So where did the growth come from? You won't need me to tell you growth in mining investment spending is exceptionally strong. New engineering construction increased by nearly 20 per cent in the quarter to be up more than 50 per cent over the year.
So far, the story fits the familiar refrain about the alleged two-speed economy. ''No wonder we think the economy's stuffed - in our part of the country, it is. All the growth's in the Pilbara and Queensland's Bowen Basin.''
Sorry, but that won't wash. The other big contributor to growth was consumer spending, growing 1.6 per cent in the quarter and 4.2 per cent over the year. Both figures are way above trend and they mean consumption contributed 0.9 percentage points to GDP growth in the quarter, and 2.4 points over the year.
Yes, you may object, but how do you know the lion's share of the consumer spending didn't come from Western Australia and Queensland? Because I checked. In the March quarter, consumption growth was above trend in all states and territories.
It was strongest in Western Australia with growth of 2.4 per cent, and pretty strong in Queensland at 1.9 per cent. But in sorry-for-itself Victoria it was a rip-roaring 2.1 per cent. The weakest it got was 0.9 per cent in NSW.
Together, Western Australia and Queensland account for a third of the nation's gross domestic product. They accounted for an above-weight 39 per cent of consumer spending in the March quarter. But that left the rest of us accounting for 61 per cent of the spending.
They're going gangbusters but the rest of us are at death's door? I don't think so.
And though it has been true the mining states accounted for most of the growth in employment around the country, it's a lot less true over the first five months of this year.
Using the trend estimates, total employment grew at an annualised rate of 1.5 per cent (not too bad) during the period. Victoria accounted for almost a third of the increase and NSW for more than a quarter.
Returning to consumer spending during the March quarter, when you scrutinise it you find it was strong across all the spending categories. Retail sales accounts for fewer than a third of total consumer spending but even it recorded strong real growth for the quarter of 1.8 per cent (though retailers had to discount heavily to achieve it - which would explain their continuing complaints).
The strong growth in consumer spending has occurred without any significant fall in the rate of household saving, which has been relatively stable at 9.5 per cent for two years. That is, consumer spending has been strong because household disposable income has been growing strongly.
The economy may not be travelling quite as well as the latest national accounts imply, but it has been travelling a lot better than a lot of us have imagined. We'd do well to cheer up.