Weeoo, weeoo, weeoo.
When the Pasconometric redlines on your arse then you have either reached the very top or the very, very bottom. For the RBA it is the latter:
It was perhaps inadvertent that the minutes of this month’s RBA board meeting showed our central bank was seriously out of touch with the economy.
When it met on March 5, the board was of the opinion that “consumption was expected to have contributed more to growth in the December quarter than in the September quarter, when consumption growth had been soft”.
On March 6, the national accounts showed household consumption retreated further in the December quarter – up by just 0.4 per cent, with growth through the year dropping to just 2 per cent.
Consumption is crook.
The minutes claim some prescience in forecasting “a markedly slower pace of growth in the second half of 2018”.
GDP growth nearly halved in the September and December quarters combined, only growing by 0.5 per cent. Yet the RBA otherwise seems to have a better outlook than the actual figures.
“Information from liaison indicated that retail conditions had softened in December because some Christmas spending had been brought forward to November, but had remained stable since then,” the minutes recorded. That turned out to be airbrushing.
Yes, January figures published two days after the meeting showed retail sales growth had “stabilised” at a dud 0.1 per cent.
The downtown is particularly sharp in the biggest state. New South Wales, accounting for 28 per cent of national retail sales, recorded annual retail sales growth of 0.6 per cent in the six months to January.
The RBA minutes say: “Survey measures of business conditions had ticked up to be slightly above average across most states and industries in early 2019.”
The NAB business conditions survey published a week later showed business conditions and confidence had fallen below average in February. Said NAB: “The decline in conditions was relatively broad-based in the month and continues a relatively sharp decline over the previous six months.”
The NAB economists also understandably put more weight on the February survey than the volatile New Year period and noted their survey’s leading indicators had turned negative. The forward orders index hit –2 and capacity utilisation “continued to trend lower and is now below average levels”.
It looks like the RBA doesn’t liaise with the same businesses that NAB surveys.
Then there’s the vital (and politically hot) area of wages growth, where the RBA seems determined to see the glass half-full despite being hopelessly over-optimistic in its forecasts for the past eight years.
“Overall, leading indicators continued to suggest that employment growth was likely to remain above average,” the RBA minutes said.
“Although some indicators had turned down a little recently.”
(The funny thing about employment/unemployment “leading indicators” is that employment/unemployment itself is generally a lagging indicator – so maybe such leading indicators end up merely being the present.)
The NAB survey is more circumspect: “At current levels, the employment index suggests ongoing employment growth of around 19,000 per month. This is slightly lower than the strong growth rates observed in 2018 but should still be enough to hold onto recent gains in the unemployment rate.”
Holding onto gains in the unemployment rate is nice – but we’re not going to get the necessary wages growth without lowering it substantially further, never mind the societal impact of merely locking in a national unemployment rate of about 5 per cent.
As the RBA itself somewhat belatedly announced, the NAIRU (non-accelerating inflation rate of unemployment) is likely to be 4-point-something. (I suspect it actually starts with a 3.)
…Released two weeks after the meeting, the March minutes have not aged well. Hopefully the welter of data since then has brought the bank up to speed.
Quite right, though The Pascometer itself can’t exactly brag given we are a full 45 days since it redlined against the RBA cutting rates, it’s four months since it redlined on a bottom for still crashing house prices, and it has spent the better part of ten years redlining on ceaseless mass immigration to crush wages.
MB Industries can neither confirm nor deny the deployment of a Spruikbot Telephunken U-47 to the RBA with a free iPascometer that it has been pumping furiously in the toilets…