Another Round Of Good Data

China’s trade is booming - which always augurs well for the Australian economic outlook.

China’s imports rose 1.5% in August, from an already strong July. Also the overall trade surplus, at a whopping US$ 51.5 billion, reassures that China continues to get wealthier at a formidable pace.

It is something we talk about quite a bit here, that China is doing well. At the start of the year the pundits and all the media were on about how China was about to seriously totally collapse. One international bank was even forecasting around 3% growth this year. Of course China is growing at well above twice that rate, and if recent data is anything to go by, is re-accelerating right now. Just as we forecast at the start of the year. This third quarter could see China GDP as strong as 7% again.

Elsewhere in the world we have seen UK data confirm that Brexit was a non-event even in their own economy. Let alone anywhere else. In the US, a momentary hesitation for just one month’s data was also due to that media frenzied Brexit fear, that looks to be past us now. Expect the US economy to be accelerating as well in real time. This means the Fed will hike rates in two weeks time and this will be cause for celebration. Confirming as it does, the long term strength and positive outlook for the US economy.

In Europe, Q2 GDP was a firm 0.3%. This is, as always, a steady achiever type of performance. The Eurozone has in fact been experiencing positive economic growth and falling un-employment, albeit still too high, for over two years now. Yet the financial market journalists and various talking heads in the media still go on about there being a crisis. There is no crisis. This is why the European Central Bank this week decided not to encourage expectations of any further easing or stimulus measures. I mean, with negative interest rates, what more do people want?

This brings us to Australia, where much fanfare was to be heard about 25 years of continuous growth. Lots of Australian journalists, economists, politicians, all trumpeting how wonderful we are? I don’t suppose anyone made the connection between China freeing up its economy 25 years ago and accelerating our growth accordingly as it went from nowhere on our radar to our biggest trade partner. Just maybe, the fact that 1.2 billion people became customers of 24 million people over this period with regard to the basic building blocks of life, food, and of their roads and buildings, mineral ores, may have had something to do with it.

Sure it’s not the whole story, but that Australia can only muster below trend growth in the midst of enormous prosperity by economies all around us far more populous than our own, hints that perhaps we should be a little more mindful of our weaknesses just now. Our quarterly growth number was just 0.5%. Not much faster than the tortoise Europe.

That said, there is no doubt Australia will continue to be strongly supported by a highly successful Asian region, which can of course, only lead to higher and higher property values.

And who knows, one day our politicians may become less focused on the handouts of Chinese businessmen, and more focused on real bold reform. Then we would truly be prosperous.

Clifford Bennett