So far so good. The flow of data today has erred on the positive side.
The AIG PMI for manufacturing, which is always choppy month to month, rose a hefty 6.2 points to 50.4 points. Maybe the low Aussie dollar, low interest rates and positive tone from the global economy are all kicking in. Either way, it is better to get an up 6.2 points than a down 6.2 points.
Then there was the TD-MI Inflation Gauge. A neutral result with inflation lifting 0.2 per cent in July, for an annual rise of 1.6 per cent. While inflation is clearly well contained, the annual inflation rate has edged up from a 1.3 per cent low in February and in the next few months, some very low monthly readings drop out of the run rate, suggesting that inflation will revert to around 2.5 per cent before year end. Not a problem, but again, better than inflation sliding towards 1 per cent … or less.
House prices remain super strong, jumping 2.8 per cent in July for an annual rise of 11.1 per cent. A tentative hint of a cooling in house price growth a month or two ago has been overwhelmed by a stunning acceleration in house price growth. The effects on household wealth and the positive loop back into new construction (it is better to start building in the knowledge prices likely higher when completed) are all positive for the economy, at least in the near term.
After a small dip in May, new home sales rose 0.5 per cent in June and remain at elevated levels – yet an other indicator pointing to strong house price gains.
Maybe, just maybe, there is hope for a return to 3 per cent plus GDP growth within the next year; even before year end with the nice 0.9 per cent lift in GDP in the March quarter providing a sound foundation. The recent data mix certainly support that, as does the solid pace of growth in the global economy, the super competitive level of the Australian dollar and super stimulatory stance of monetary policy.
The RBA Board will know this when it meets tomorrow. The chance of a rate hike are slim, and a cut slimmer. “On hold” remains a Hawthorn versus Carlton proposition – close to certain.