Activity Moderates Again

After rebounding strongly in July and August, TDA’s Monthly Activity Indicator (MAI) was virtually flat in September and declined by a modest 0.2% in October. Activity in October was no doubt impacted by the residual effect of the Victorian lockdown. As a result of the small October decline, the annual rate of growth moderated slightly to be below its ten-year average.

Undoubtedly, the main driver behind the strength in the MAI has been the buoyancy of retail spending, which is up over 7% on a year earlier. This is perhaps not surprising given retail, let alone consumer, spending has been underpinned by the strongest annual growth in nominal household income for nearly ten years. So, while the other components of the MAI have fluctuated, sometimes wildly, this has often been swamped by the strength and volatility of retail turnover

On the basis of keeping Covid-19 cases low or insignificant, the economy should continue to open up and grow both within and among the states and territories. Offsetting this, Government transfer payments to both companies and individuals are being pared back and, in all likelihood, a softer labour market retrain activity.

About the MAI

 With no official monthly measure of Australian activity available it is difficult to get a timely measure of how the economy is performing. In an attempt to fill this gap, The Data App (TDA) developed a Monthly Activity Indicator (MAI). The MAI is estimated using an econometric model based on a number of different, high frequency, monthly economic activity indicators as key factor input variables.

Given the current economic climate, the MAI should assist in quantifying the magnitude of the current economic downturn, as well as identifying a point of inflection.

Key attributes of the MAI include:

  • Tracks activity in the private sector economy.
  • An indicator for tracking business cycles – downturns and upswings in the economy.
  • A timely measure of economic activity.

The Data App (TDA) is part of the PAR.Group, an independent research collective. More information about the group can be found on the website