Joint Statement by Baillieu Limited Chairperson David Trude and Managing Director Gavin Powell

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Australian lead indicators point to a V-recovery

Of 12 key Australian leading indicators, 10 have resurged from COVID-related lows and are already materially above pre-COVID levels. In this note, we analyse the implications of these lead indicators for growth, profits and stock selection.

The lead indicators cover the consumer, housing, business, trade, employment and financial sectors, including:

  • Consumer: consumer sentiment, retail sales and vehicle sales are up 7.1-17.7% YoY and all up at least 6.7% versus pre-COVID levels. Sentiment is at a decade high.
  • Housing: dwelling approvals, housing finance and new home sales are up 14.3-33.8% YoY and up at least 9.5% from pre-COVID levels.
  • Business: NAB business confidence has seen a V-recovery to the third highest level in a decade.
  • Trade: resilient commodity prices, 5.5% above pre-COVID levels, and a sharp turn in farm production are strong positives for the external sector.
  • Employment: ANZ job ads have resurged to be just 3.3% lower year-on-year. Ongoing reopening and recovery should push this much higher.
  • Financial: money supply growth has surged to 12.1% YoY, a 12-year high, and is set to move much higher on RBA quantitative easing (QE). The ASX 200 is the second laggard lead indicator, up 43.1% from the bear market trough but still 7% below the pre-COVID peak. The rally should continue as the V-recovery becomes more apparent.

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