Suddenly there's a stutter in the surging economy, or so it seems.
In the past few days some major statistics have cast some doubt on the strength of activity in the economy, or suggested that there might be some sluggishness occurring.
Last Tuesday we learned of a strong rise in the value of construction work done in the September quarter, which pointed towards another quarter of strong growth in private new capital expenditure.
But on Thursday that was shown not to be the case as the figures from the Australian Bureau of Statistics revealed a surprise slowdown in private capital spending in the three months to September.
Expected spending over the next year was still strong as companies in the resource and infrastructure sectors planned to spend, but the ABS revealed that new private capital expenditure fell 6.5% in real terms, seasonally adjusted, in the September quarter to $19.638 billion, from an upwardly revised $21.005 billion in the June quarter.
The figures showed the big fall in capital expenditure was driven by a slump in building and construction. Building was down 9.4% in the quarter.
The result was well below the median market forecast for a rise of 1.7% and surprised economists and analysts.
Yesterday we learned from the latest ABS figures that October saw a 36 year high for the trade deficit, against all expectations, while corporate profits surprisingly fell in the September three months.
The ABS said the strong Australian dollar and the drought cut exports, along with continuing capacity constraints on shipments of commodities like iron ore and coal, and delays in bringing new facilities into operation.
October's goods and services deficit widened to $2.983 billion, seasonally adjusted, marking it the worst level since records of the monthly measure began being kept in 1971.
The result compared to an upwardly revised $1.916 billion in September.
Exports fell 3% in adjusted terms in October, while imports rose 2%.
Economists had been forecasting a deficit around $1.9 billion for the month.
HSBC chief economist Dr John Edwards said the stronger Australian dollar was continuing to cause difficulties for exporters.
"We've had a very poor export performance over the whole of the last year," he said." It looks like across-the-board weakness.
"Part of that is the stronger Australian dollar." But it's not unusual for our exports to be weak. They've been weak for a while.
"The drought is kicking in, that's affecting the rural side," he said." We've had persistent problems with capacity constraints on the mining side. That's having an influence."
The ABS said: "in seasonally adjusted terms, the balance on goods and services was a deficit of $2,983m in October, an increase of $1,067m on the revised deficit in September.
"Goods and services credits fell $615m (3%) to $17,235m. Non-rural and other goods fell $545m (5%) and rural goods fell $99m (5%). Services credits rose $29m (1%). Goods and services debits rose $453m (2%) to $20,219m. Intermediate and other goods rose $624m (8%), capital goods fell $191m (5%) and consumption goods fell $69m (1%). Services debits rose $89m (2%)."
The ABS said that In original terms: "the October 2007 balance on goods and services was a deficit of $3,992m, an increase of $1,935m on the deficit in September. Goods and services credits rose $67m and goods and services debits rose $2,002m (10%). In the four months to October, exports of non-rural and other goods were up $210m while rural goods were down $1,234m (14%) on the corresponding period in 2006-07.
"In October 2007, the Australian dollar appreciated strongly against major currencies."
But economists were further surprised by the figures contained in the November business indicators from the ABS which showed an unexpected fall in corporate profits in the quarter.
The Bureau said profits fell by a seasonally adjusted 2.1% in the September quarter to $46.52 billion, compared to the June quarter.
(The ABS measures gross operating profit as earnings before tax, interest, depreciation and amortization. It excludes asset sales and foreign exchange gains or losses.)
Dr Edwards said the fall in the September quarter's business profits was a correction after a 1.4% rise in the three months to June.
"Broadly speaking, profits were expected to increase," he said. "It looks like we've had a correction after strong growth and the weaker result could detract from GDP for the September quarter."
Economists had forecast a 2% increase, meaning their estimates have missed the private capex figures, the trade deficit and the corporate earnings figures.
And there was another where the forecasts were wide of the mark.
Business inventories were higher in the September quarter, according to the ABS indicators.
They rose by a seasonally adjusted 1.3%, well above the consensus forecast from the market estimate of a half a per cent rise.
Dr Edwards said the rise in business inventories could add to GDP growth in the quarter but overall the GDP figures could be weaker than people were expecting.
Prior to yesterday's ABS figures, business economists were forecasting a 0.8%-1.2% rise in GDP in the September National Accounts due out tomorrow, which would put annual growth between 4.6% and 5.0% in round figures.
The rise in business inventories will contribute: last Friday's quarterly trade figures showed little positive or negative contribution from the external account, so the capex and business profits falls might be signalling a slower pace of activity is developing.
But economists still say that on balance we have a strongly growing economy, but with cracks developing.
Retail sales
