There is a lot of data out there telling us about how the economy is going.
Building approvals, retail sales, the unemployment rate and consumer confidence are a few of the frequent indicators we are inundated with.
Broken down to the state level, the information is even more plentiful – but harder to absorb.
These indicators are useful for telling us about various parts of the economy but they don’t give us a “whole-of- economy” picture.
By the time we get GDP data and its various state and territory components, the quarter is more than two months past.
That’s too long to wait to get a true picture the economic status quo.
So ANZ Bank have created the ANZ Stateometer.
It synthesises a large volume of monthly data to give our clients a one-stop-shop for current state and territory economic conditions.
In a recent report Cherelle Murphy and Kirk Zammit Co-Head of Australian Economics & Economist at ANZ Research explained what it’s all about and how our various state economies are perforeming.
Here’s what they had to say:
Source: ANZ Research.
The graph above shows for each state and territory the deviation from trend growth (on the vertical-axis) and quarterly change in annual growth or ‘underlying momentum’ (on the horizontal-axis).
Values are standardised to zero mean and a variance of one.
So what is the ANZ Stateometer telling us?
Firstly, of course, there are a number of different drivers around the country leading to some quite different conditions.
Economic activity in NSW and Victoria is growing faster than long-run average rates.
The upturn in activity in NSW and Victoria (which together account for more than half of Australia’s GDP) has been important in rebalancing activity as resources investment has turned down.
Given their strong inter-linkages with the rest of the country, NSW and Victoria’s performances bode well for an ongoing, albeit slow recovery.
The ANZ Stateometer also revealed Queensland’s positive signs early in the year.
While this has stalled over the June quarter, we think the overall direction is up.
Tasmania is at risk of losing steam, with economic activity in the state having fluctuated around its trend rate recently.
Economic activity in the heavily resource-dependent states of WA and the NT appear to have stabilised for now.
SA has fallen further behind.
We expect further weakness for these three is on the horizon. The ACT is playing catch-up with strong momentum over the second quarter but this was from a low base.
The indices are smoothed by applying a 3-month moving average. Values are standardised to zero mean and variance one.
Source: ANZ Research.
So watch this space.
The ANZ Stateometer will be updated quarterly to wade through the swamp of economic indicators.
We’ll provide one number and one indication of momentum for each state and territory to give our clients a good feel for current conditions.
We’ve included 16 economic indicators covering labour market conditions, household and business activity and prices and analysed them using a statistical technique called principal component analysis.
PCA allows us to reveal common trends in the data, and in our case, the underlying pulse of domestic economic activity for each state and territory.
The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.
Source: ANZ Blue Notes