June quarter growth in GDP was 0.6%, according to The Australian Bureau of Statistics (ABS), bringing the 12 months up to June 2013 to a seasonally adjusted 2.6%. Looking back over to about 1999, these weren't the best of times, these weren't the worst of times.
Annual GDP growth is about right in the middle of that 14-year range. The perception of how we are doing is all based on what has happened in the most recent past. We may feel like the economy is soft, and there's more to worry about than to be inspired by. That's natural, but it's also old news.
The ABS actually revised previous projections up for the quarter, starting out with a 0.5%, and adjusting the 12-month projection up from 2.4%. As more data comes in, the anecdotal trends turn into actual results.
What is holding back the economy? One reason put forward by the Australian Industry Group is that "cautious consumers are keeping their hands in their pockets, and reluctant to take on debt", according to the Group's chief executive, Innes Willox.
By restraining discretionary spending, consumers are hampering retail goods, entertainment services and hospitality, by which wholesalers and transports feel the knock-on effect. The ABS report speaks of that effect by way of household savings.
Since 2003, the net amount of income that we save had been rising, but after 2007 rose almost two times higher than the 2001 peak of 4%. The figure is standing at about 10.7%. The GFC may not have hit Australia as hard as the US or Europe, but it affected the psyche of shoppers and savers.
The fear of the economy going down or flat for a long time makes you want to spend less money, so you sock it away, and the corner grocery store and shopping centre owner feel it along the way. And just when it seems cold and dark, the clouds part and the sun starts to come out.
That's the problem with projections — they're based on past performance and projected like a light beam in the future, but change the initial angle, and you get a whole new number.
Case in point is Rio Tinto's (ASX: RIO) announcement that its iron ore production outlook for 2018 will be decreased because of lower commodity prices and lower Chinese demand for the ore. This came out at the same time as other reports of increased levels of iron ore exports bound for China from WA's Port Hedland. Exports from this one port account for 20% of all global seaborne iron ore market, and rose by 9% between the months of July and August.
Foolish takeaway
Companies have to plan years in advance to hopefully make the best use of resources, but what if, in this case, Chinese demand does pick up, and commodity prices rise also? Well, time for new projections. To all you consumers, just go out and buy, and get things flowing again.
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Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned.
