So yesterday there was some good news — very good news — for the construction industry. ABS data showed a sharp uptick in seasonally-adjusted housing finance and the purchase of new housing.
As noted last week, construction is one of the two large areas of the economy the Federal Government is clusterbombing with cash as part of its efforts to prop up employment. It did so through a boost to the First Home Owners’ Grant, and particularly a big increase for people buying new housing, and it will do so again through second stimulus package with its housing and schools infrastructure spending. Yesterday’s data, apart from being unambiguously good news, is yet further evidence of the effectiveness of the Government’s first stimulus package.
But you wouldn’t have got that impression from the media coverage, where it was contrasted with some recession p-rn served up in the “Westpac-Melbourne Institute Index of Consumer Sentiment” which “fell 4.6%” and “shows a level of pessimism equivalent to that of the 1990-92 recession.”
It wasn’t just The Oz. The SMH: relief for the housing sector “comes amid broader economic gloom”. The Age: “the good news was offset by an unexpectedly sharp slump in consumer confidence this month.”
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There’s a regular drip of surveys like Westpac-Melbourne Institute one. There’s the NAB Survey of Business Confidence. The Dun and Bradstreet National Business Expectations Survey. The Hudson Employment Expectations survey. The Sensis Business Index. The ACCI Survey of Investor Confidence. The Melbourne Institute Consumer Inflationary Expectations Survey. And they’re just the biggest and most regular ones.
Notice something about them? They’re all branded. Regardless of their accuracy, they’re marketing exercises designed to promote companies, peak organisations or research bodies. The Westpac-Melbourne Institute survey was accompanied by suitably doleful commentary from in-house economist Bill Evans, and got a run everywhere as an insight into the imminent future of the Australian economy.
Even if it’s a PR exercise, the Westpac-MI survey is well-regarded. But compared to actual evidence from the real economy, it’s meaningless. Confidence may be one of the biggest problems facing the economy, but it’s what people spend in the real world that matters. Putting data showing the housing sector turning the corner on the same level as a consumer survey confuses hard evidence with, at best, speculation. The two do not belong together and cannot be comparable or “offset” each other.
There may be an excuse for the media when there’s no hard evidence coming out to treat surveys, forecasts and indices with all the reverence of ABS stats, particularly if an appropriately gloom-laden story can be crafted from them. That doesn’t apply in this case.
There’s further evidence from the real world today in the form of unemployment data. The consensus forecast from economists was 4.7%, the actual number 4.8%. Thus, “unemployment soared” and “exceeded expectations”. More confusion of evidence and speculation. The data continues to disguise substantial variations. NSW unemployment is now 5.4%, but Victoria, Queensland, WA and Tasmania all remain below 5%. In fact, unemployment fell in Tasmania, and on the back of a higher participation rate as well. And Western Australia continues to have full employment — 3.2%.
Any one of them is a number most major economies would kill for at the moment.