The stock markets of the world have been in decline for the past month as investors fret about a double dip recession, while the official data says global recovery is underway.
The stock markets of the world have been in decline for the past month as investors fret about a double dip recession, while the official data says global recovery is underway.
This point has been reinforced by today's surprise 1.2 per cent expansion of the Australian economy in the June quarter.
Investment bank analysts had been expecting gross domestic product to expand by 0.9 per cent in the quarter, and while the difference with 1.2 per cent might not seem much it is a significant gap in economic terms, complementing the better than expected trade figures which came out yesterday.
For Australia the GDP growth rate, and improving terms of trade, are excellent news - but the real surprise of the past 24 hours is that we're not alone.
In the U.S., global-gloom central, there was also a steady flow of positive economic data overnight. Housing prices, which had been expected to fall in June actually rose 0.3%, taking the annual house price increase to 4 per cent.
Consumer confidence, which was tipped to be flat rose by 5 per cent.
There's a pattern forming which is both hard for economists to explain, and which is also making business investment decisions unusually difficult - and it's all about time.
The official data reflects where we have just been, with the surprise being that conditions were better than we had been led to believe. The Australian economy expanded by 3.3 per cent in the 12-months to June 30, driven by rising exports and increased consumer spending.
The stock market is trying to tell us where we're heading, playing its role as a bellwether of conditions over the next six to nine months.
Until today, the stock market was all gloom, perhaps mistakenly so. Today's GDP data could be the signal for a change in outlook. The immediate reaction was a sharp increase in share prices and the value of the Australian dollar.
Holding on to those gains will be tomorrow's challenge, but it is hard to ignore the steady flow of good news from the "real" economy which appears to be overpowering the bad news from nervous markets.
It is, of course, a brave investor who ignores signals from the stock market but there are indications that the gloom we've been enduring has gone too far and that the outlook is better than some experts have been predicting.
The best example of optimism outweighing pessimism is BHP Billiton's $US40 billion takeover bid for Canada's Potash Corporation. This is a move which is not only into a new industry for BHP Billiton it is a massive bet on demand for fertiliser rising strongly as the Asian growth miracle continues.
BHP Billiton's view of the world is that the same forces which turned iron ore into Australia's most valuable export are now at work in the food industry. The Chinese want more than better bridges and buildings, they also want beef with their noodles.
Today's GDP data adds to a number of indicators which point to 2011 being a better year than what the stock market has been saying.
Last week a glimpse into the future of the building industry revealed how private sector construction work was taking over from government sponsored stimulus work.
In WA in particular there was a surge in engineering jobs as the resources boom kicked back into action.
That picture has just been reinforced by today's 1.2 per cent June quarter growth rate, and associated data showing that investment in dwellings rose by 5 per cent in the quarter, taking it to 11.3 per cent over the 12-months to June 30.
All this might not be sufficient reason to pop the champagne just yet, but it might be worth pricing a bottle of the good stuff at Vintage Cellars.
