The run of data in the few days since Tuesday’s meeting of the RBA Board has continued the trend of strength, confirming a substantial lift in the non-mining investment parts of the economy.
The RBA appears to be too gloomy with its views on growth and sanguine on inflation as it happily leaves interest rates at record lows, inflating house prices along the way and allowing the rest of the economy to pick up momentum at an increasingly worrying pace.
In terms of the specifics, retail sales rose a further 0.2 per cent in February and this is after a stonking 1.2 per cent rise in January and 0.7per cent increases in both November and December. Since September 2013, the annualised growth rate of retail spending is an over-heated 8.5 per cent. In trend terms, retail sales are also strong and barring some massive shock, it looks like real retail spending rose by massive 1.25 per cent in the March quarter. This is a terrific kick-start to the GDP growth.
The export performance remains super-charged with annual growth now at 17.6 per cent and the balance on international trade moving squarely into surplus. All of that investment in mining is clearly yield extra output, the bulk of which is being exported and adding to bottom line GDP.
What’s more, the number of building approvals for dwellings remains strong, with the 5.0 per cent dip in February only partly unwinding a stellar 6.9 per cent rise in January. Put another way, the month to month noise is merely a distraction from the fact that dwelling approvals have been rising on a trend basis for more than two years.
Even job vacancies are turning, with the ABS measure up a decent 2.3 per cent in February. This marks the start in the uptrend in demand for labour. The ABS series is now matching the ANZ job vacancies series which is also showing signs of improvement.
In all, the economy is transitioning away from the mining investment phase and more towards domestic activity and exports.
Indeed, when the March quarter national accounts are released, GDP growth will be back at a trend pace of 3 per cent. With that growth rate all but baked in the cake, get set for the unemployment rate to start to fall soon and for the inflation outlook to become a little more problematic.