Overseas good; here crap
by Peter Switzer
And this puts the focus on the poor economic growth number for our December quarter, which has to increase the chances of a rate cut sooner rather than later.
For the record the Dow increased 78.18 points or 0.61 per cent to 12,837.33 while the S&P 500 put on 9.27 points or 0.69 per cent to 1352.63.
Driving this much better result was the news that nearly 40 per cent of Greece’s creditors — around 30 key lenders made up of banks and funds — put their hand up to support the deal scheduled to be signed off on Thursday.
So with one fear partially out of the way, along came the ADP Employment Report, which looks at private job creation, and 216,000 turned up in February instead of the 208,000 which was expected by the experts.
Economic growth and employment
Back home and economic growth for the December quarter came in at 0.4 per cent instead of the expected 0.8 per cent, which means the annual economic growth number was 2.3 per cent instead of the 3.25 per cent the Reserve Bank (RBA) has been telling us about.
To me it’s simple — if you get this number wrong, you have to doubt your thinking that prevailed at the February and March RBA board meetings when the decision was made to not change interest rates. If the number came in at 3.25 per cent I would have donned my cap and said “OK, you guys are right, I will lay off bagging you now”, but the opposite has happened and that’s why I’m giving it to them right now.
Sure I could have to think about easing up on my tirade if the jobs number today is better than expected, but I will keep on them until I see three more months of unemployment reads. Jobs can be a lagging indicator and I just think so many firms started to cut jobs because they knew that their businesses weren’t doing well, which was reflected in the 2.3 per cent growth number.
I can imagine the apologists for the RBA will find some reason to back their judgment, which was wrong last year and was wrong in 2007 and 2008, but these people don’t employ people, don’t go to bed each night hoping that clients will say yes to proposals and have to face accountants who say to them — cash flow isn’t great, you might have to chop costs and jobs!
I can honestly say that I hope I’m wrong but my reading on the economy, which has been miles more right than the RBA team for quite some time, tells me that another cut is needed, maybe two more.
By the way, 80 per cent of economists agreed with me in February when they tipped a rate cut but now a hell of lot of them are toeing the RBA’s line.
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Published on: Thursday, March 08, 2012
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