And so this wonderful week of economic data hit the peak today with the national accounts being released by the ABS (labour force and industrial disputes are out tomorrow).
The September quarter figures should in seasonally adjusted terms, Real GDP rose by 0.5%, for an annual rate of 3.1%. This was a fall from the year on year rate in the June quarter of 3.8%. Those sharp thinkers among you might recall that in September when the last figures were released the year on year growth was 3.7%. The ABS revised the last few quarter a bit:
June Growth Figures
September Growth Figure
Back when the March 2012 figures initially came out there was a fair bit of hoo-ha suggesting the ABS had stuffed it all up because the March growth was 1.3% (or more specifically 1.2957%).
Tim Colebatch (who I generally think gets it right) for example wrote at the time:
THERE'S an old saying among economists: if a figure looks wrong, it usually is. Yesterday's estimate that GDP grew 1.3 per cent in the March quarter amid all the job cuts is a good example.
These figures strain credulity.
And he ended with:
Wayne Swan wants us to take pride in these figures. I would if I could believe them.
At the time I tweeted a pretty scathing assessment of his piece.
Well since then the March quarter growth figures have been revised. Last quarter they were revised up to 1.376%, and this month they were revised down to 1.298%, leaving them a whopping 0.001% different form the initial estimate.
I think we can believe them.
OK some graphs – here is the quarterly growth:
It doesn’t look all that wonderful to be honest. Take out the (very good) March figure and things are not looking that rosy. And the trend certainly gives you a sense of where things could be headed.
The annual growth figures say much the same:
Now one very interesting thing about the figures released today is the GDP deflator. This is essentially the inflation gauge used to determine the “real GDP” – which is nominal GDP growth minus inflation . The GDP deflator shows we have been experience deflation
To get a sense of how unusual this is look at the annual GDP deflator all the way back to 1960:
Things are pretty irregular at the moment.
What this means is that rather oddly nominal GDP growth is actually below real GDP growth:
This is not actually a good thing. Sure we love low inflation, but deflation? That ain’t a sign that things are healthy.
Similarly let’s compare GDP growth to GDP per capita growth. What you see is that during the GFC Real GDP (which ignores growth in population) grew more (or fell less) than did GDP per capita growth. After falling back to near average levels in 2011 once again it is increasing – a sign that the economy might be doing OK, but it is not really being felt across the nation.
The quarterly growth of 0.5% is being talked down as a bit of a disappointment. Personally I was relieved – I thought it could be less given how crappy things were in that September quarter. The Terms of Trade for example were really bad, falling 4.0% for a 13.7% fall in the past 12 months. For a country that loves making money from mining, that makes it hard to keep growing:
OK, now to productivity.
It increased in the September quarter by 0.7%, for an annual rate of 3.1% (seasonally adjusted). Needless to say, it’s along way from the 1% annual productivity growth level thrown around whenever any business leader wants to talk about the need for “flexibility”. Also don’t forget that the big drop in productivity during 2010 was due to the floods in QLD, where GDP fell but employment did not (because mines etc didn't sack staff, because they knew the mines would re-open once the water was cleared away).
But even if you ignore that we’re looking at a run of positive annual productivity growth not seen since around 2000. (But don’t worry, tomorrow the industrial disputes figures will come out and no doubt there’ll be a way to say how terrible is the Fair Work Act for the economy)
Now to labour costs. I’ll use non-farm just to be as fair as possible – because total real unit labour costs actually fell 0.7% this last quarter, whereas non-farm stayed flat:
In my Drum piece a couple week’s back looking at IR legislation I noted that real unit labour costs, while they had increased of late, were still pretty much in keeping with the trend decline of the last 6 years of the Howard Government and had only increased in the past year because they had declined so abnormally during the GFC. This quarter’s figures confirm this to be the case:
Similarly the nominal unit labour costs continue to be low – lower than the average from 2002-2007. So the RBA certainly won’t be worrying about labour costs when considering inflationary pressures:
A quick look at where the national income is going shows us now back to pre-GFC ratios:
And the Household Savings Ratio stayed much the same:
So that’s the big picture stuff. I’ll have a bit more of a look at the data tomorrow (time permitting) – examining the states etc.