With the diametrically opposing forces of various financial stimuli, lockdowns and restrictions on physical movements, the Australian monthly activity indicator (MAI) has exhibited both large and volatile movements since March last year.
The MAI continued this topsy turvy trend in November. Following two months of very little movement, the MAI posted its second largest rise in November, increasing by 1.7%, as the Victorians, emerging from a lockdown, embarked on a spending spree. With the monthly increases in the MAI eclipsing the declines, the annual rate of increase posted its highest reading since March 2008.
The main driver behind the strength in the MAI continues to be the buoyancy of retail spending, which rose an eye-watering 7% in November to be 13% higher than a year earlier. This, along with an improvement in employment and business conditions, was enough to nullify declines in exports and building approvals.
Whilst the partial lockdown in parts of Sydney will undoubtedly crimp activity, it is unlikely to compensate for the stronger drivers in the other states and territories. By the same token, with no significant lockdown currently in operation and the Government’s stimulus programs being moderated, the degree of activity volatility should start to moderate.
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 http://par.group/