Terry McCrann: US and global economies are looking good

IF you look through the hysteria over Trump’s tariff tirade and the “statistical noise”, both the global and local economies are looking in good-to-very-good shape, writes Terry McCrann.

IF you look through the media and so-called “expert” hysteria over Trump’s tariff tirade and the “statistical noise”, both the global and local economies are looking in good-to-very-good shape.

Even the much-predicted collapse in our property market might have come and gone without anyone much noticing.

Although I’d better quickly qualify that.

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I was exaggerating a bit to mock the doom-mongers who, if they can’t predict never-ending boom, have to switch to warnings of collapse and utter disaster.

Property is complicated.

Traders on the floor of the New York Stock Exchange on Friday

You have to break it down by type — houses versus apartments; new versus old; city versus the rest; inner versus outer suburbs; old, new and off-the-plan apartments; and even more minor subcategories.

Then, you have to look at various layers on the borrowing side — the total level of debt, the size and timing of “interest-only” loans.

Plus the general economy both macro (overall) and by sector.

We’ll come back to all that in a later column. Suffice to say, property broadly is heading sideways in an extended digestion. It’s not going to collapse.

The single most important thing to understand through the noise and stupidity is that the US economy — still, easily, the single most important in the world — is back in town.

If you want, that’s “despite Trump”; the truth is that Trump added to an already building dynamic.

This was shown most graphically overnight on Friday: the US recorded its biggest jump in jobs in two years — 300,000 in February.

Wall St, which was supposed to be on the verge of plunging midweek, leapt nearly 2 per cent.

The one-month job increase in the US added to around three-quarter the numbers of jobs created in Australia over all of 2017.

But let me emphasise we both are having great job-creating periods.

It’s just they are doing better — the US jobless rate is down to 4.1 per cent; ours is at 5.5 per cent.

I’m old enough to remember when it was taken as an absolute truth that our jobless rate would always be lower, and often much lower, than America’s. Sadly, and badly, no more.

The critical point is that America is back to doing what it did for the entire second half of the 20th century and what we really need it to do — underwrite a stronger global economy.

We also need China to keep on pumping iron (and steel). China is the new “riddle, wrapped in a mystery, inside an enigma” — Churchill’s tag for Russia — but peering through the murk I believe it’s going to be at least OK.

So, the “outside” is looking good (China), to very good (the US) — that swings us back to the local GDP figures that came out midweek.

The first big point is that quarterly GDP figures are just too dodgy. You really have to put two quarters together. That shows the economy is OK, if not great.

The critical point is when you dig deeper you get a better sense of it picking up in the right places — non-mining investment and surprisingly overall consumer spending — as against the weak more specific retail data (sorry Myer shareholders: no joy).

The single biggest question mark over the Australian economy has been what exactly would be the life after the mining boom — apart from all those apartments in Melbourne and Sydney?

The data detail suggests we might finally be getting investment outside these two areas; and very encouragingly a lot of it seems to be in the 21st century IP (Intellectual property) space.

There’s also a very big bonus in the “not too-hot” overall state of the economy (and the cooling of the property boom and apartment-building frenzy).

It means the Reserve Bank ain’t going to be lifting the official interest rate anytime soon. We want the US Fed to keep lifting US rates. Absent a left-field global implosion it will on Thursday-week.

The Reserve Bank is unlikely to raise rates soon.

That should dampen — but not crush — world stock markets.

It also promises a stronger, healthier US economy for longer.

It will also feed to some extent into higher Australian rates.

But will take pressure off the Aussie dollar and allow the RBA to watch and watch some more.

In short and in sum, 2018 is shaping up as: US and global economies pretty good; the Aussie economy following (with some pressure points around household debt and not much joy for bricks and mortar retailers); property going broadly sideways; Wall St going sideways to perhaps 10 per cent down; our market similar to slightly worse.

Oh yes, and plenty of hysteria over President Trump creating both trading and buying opportunities.

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