Interesting analysis from the AFR's Alan Mitchell, who is notoriously close to the RBA:
While the 0.4 per cent seasonally adjusted GDP growth rate in the December quarter was only half that expected by economists, the Australian Bureau of Statistics’ trend estimate of GDP showed the economy growing at 0.8 per cent a quarter – which is what the private forecasts and the RBA had been forecasting.
The ABS has been trying for years to convert everyone to the superiority of its trend estimates with limited success. The problem is the trend data filter out both statistical noise and genuine information. Yesterday’s data certainly contains the usual quota of puzzles, and economists were left to ponder them.
What are the implications of the fall in farm inventories that sliced more than half a percentage point off GDP growth? Why is mining output still so lacklustre, and manufacturing growth so strong?
Manufacturing’s strength appears to be concentrated in steel products despite the anecdotal evidence of weak demand for local steel and aluminium.
Perhaps when the puzzles are solved and the statistical noise is separated from the information, the December quarter will look stronger.
In the meantime, the economists and the government can console themselves with the thought that the future still looks reasonably bright.
The improvement in the global economic environment and the temporary nature of the lull in investment spending in the December quarter, mean that the medium-term forecasts of trend growth still look pretty safe.
