According to a report from Societe Generale’s Cross Asset Research, the Australian economy is moving ahead full speed and showing no signs of slowing down. SG’s Head of Economics Michala Marcussen and team summarize some positive early readings for 2014 regarding Australia.
“The first Australian activity data for 2014 indicate that the economy started 2014 where it left off in 2013 – on a very firm footing. Indeed, the economy appears to have lost none of its momentum, and the main growth forces that propelled it to grow by 3.2% at an annualized rate in Q4 were still signaling strength in January: namely, private consumption and exports. Retail sales and foreign trade data this morning far exceeded expectation.”
Australian economy driven by strong retail sales
The SG report highlights that Australian retail sales increased by 1.2% month over month in January, well above analyst estimates, and December sales were also revised upwards from 0.5% to 0.7%. The analysts suggest that the continuing momentum in private consumption is likely driven in large part by the “wealth effect” from rapidly surging residential real estate prices.
Australian economy: Exports remain strong
Marcussen et al. also point out the continuing strength in Australian exports. “Instead, exports grew an other 3.7% mom after December’s 4.3% gain, to stand 20.1% above January 2013’s level (December 15.4% yoy). That was the main reason why the trade surplus surged to A$1.4bn from A$591m in December, far exceeding expectations (median 100m, SG-300m). In January 2013 the trade balance was still in the red to the tune of 1.5bn.”
Exports to China were down slightly, but largely in line with the normal seasonal variation pattern. The year-over-year growth rate for January was up slightly at 38.2% after 37.9% in December. The SG analysts also highlighted that the correlation between Australian government data on exports to China and Chinese government data on imports from Australia remains strong. Exports to Japan, Korea and even EU were also all up on a year-over-year basis.