Job ads hit 9-year highs; Record cereal exports
Preliminary international trade; Skilled job ads; Purchasing manager indexes

Skilled job vacancies: The National Skills Commission reported that skilled internet vacancies rose by 7.0 per cent in February to be up 24.8 per cent on the year. Vacancies are at 9-year highs. Job advertisements increased across all eight broad occupational groups and the 48 detailed occupational groups during February 2021.

Purchasing manager indexes (PMI): The IHS Markit ‘flash’ PMI for manufacturing rose from 56.9 in February to 57.0 in March. The services business activity PMI rose from 53.4 to 56.9 in the month. The composite PMI rose from 53.7 to 56.2. Readings above 50 indicate an expansion in activity.

Preliminary merchandise trade: In original terms, the value of exports of goods rose by 1.6 per cent in February while the value of imports rose by 2.5 per cent. The trade surplus narrowed from $8.175 billion to $8.1 billion.

Exports & imports: Imports of cars soared 24 per cent in February. Cereal exports hit record highs, underpinned by a 20 per cent lift in wheat exports.

The trade data is instructive on income flows in the economy and consumer and business activity and has implications for the currency. The ‘flash’ purchasing manager’s index gives a guide to conditions in manufacturing and services sectors. Job ads/vacancies are an important gauge on the direction of consumer spending.

What does it all mean?

• The job market continues to tighten. And while there are hotspots like demand for labourers and, health-related occupations, job vacancies were up across the board in the latest month. The latest data will allay fears held for the job market and broader economy with the looming expiry of JobKeeper.

• Australia’s services and manufacturing sectors are ticking over nicely. Survey readings above 50 indicate expansion in activity, and both sectors have readings near 57 points. The main positive finding is that employment is lifting at a solid pace. The area worth watching is costs – higher prices are being reported for a wide range of materials.

• Exports rose near 2 per cent in the latest month, providing encouragement about offshore demand for Aussie goods. While iron ore exports fell, wheat and metal exports surged. And imports also rose near 2 per cent, providing encouragement about consumer and business spending in Australia. Trade accounts remain firmly in the black – the first time in history Australia’s trade surplus recorded three consecutive months above $8 billion.

What do you need to know?

‘Flash’ purchasing manager indexes (PMI)

• The IHS Markit ‘flash’ PMI for manufacturing rose from 56.9 in February to a 2-month high of 57.0 in March. The services business activity PMI rose from 53.4 to a 3-month high of 56.9 in the month. The composite PMI rose from 53.7 to a 3-month high of 56.2. Readings above 50 indicate an expansion in activity

• IHS Markit noted: “Data for March indicated that the loosening of coronavirus disease 2019 (COVID-19) restrictions led to a surge in new work received by Australian companies, which in turn underpinned a stronger expansion in business activity. With operating capacities coming under pressure, firms continued to lift employment at a solid pace. The latest results also highlighted a survey-record increase in input costs, with panellists mentioning higher prices for a wide range of materials and a spike in shipping fees.”

Preliminary international trade – February

• According to the Bureau of Statistics (ABS), in original terms, the value of exports of goods rose by 1.6 per cent in February while the value of imports rose by 2.5 per cent. The trade surplus narrowed from $8.175 billion to $8.100 billion.

• In the year to February the goods trade surplus (exports less imports) was $76.6 billion, up from $74.6 billion in January but off the record high of $87.3 billion in the year to April 2020.

• Australia’s annual exports to China rose to an 8-month high of $148.27 billion in February. Exports to China are down 2.1 per cent on a year ago.

• Australia’s annual imports from China hit a record high of $86.58 billion in February. Annual imports are up 6.5 per cent on a year ago. A record 29.4 per cent of imports come from China.

• Australia’s rolling annual trade surplus with China eased from $62.57 billion to $61.7 billion in February.

Job vacancies – February 2021

• The National Skills Commission (NSC) reported that skilled internet vacancies rose by 7.0 per cent in February in seasonally adjusted terms to be up 24.8 per cent on the year. Vacancies are at 9-year highs.

• Skilled vacancies by state/territory: NSW (up 9.2 per cent); Victoria (up 6.1 per cent); Queensland (up 7.2 per cent); South Australia (up 10.5 per cent); Western Australia (up 0.7 per cent); Tasmania (up 13.3 per cent); Northern Territory (up 11.8 per cent); ACT (up 10.4 per cent).

• The NSC noted: “Job advertisements increased in all eight broad occupational groups over the year. The strongest gains were recorded for Labourers, up by 66.5 per cent (or 6,000 job advertisements). The 15,000 job advertisements for Labourers in February 2021 is the highest level of recruitment activity in the occupational group for more than eight years.”

• “The level of recruitment activity for several health-related occupations (specifically, Carers and Aides, Medical Practitioners and Nurses, Health Diagnostic and Therapy Professionals and Health and Welfare Support Workers) reached all-time series highs in February 2021. Collectively, there were 25,100 advertisements for these positions during February 2021.”

What is the importance of the economic data?

• IHS Markit undertakes a survey of purchasing managers across manufacturing and services sectors. The ‘flash’ or ‘early/preliminary’ readings provide timely information on the economy. As such, the survey is valuable for investors.

• The monthly International Trade in Goods and Services release from the Bureau of Statistics provides estimates on exports and imports of physical goods (such as coal, beef and computers) and services (such as travel receipts). The balance of goods and services (BOGS) is a narrower description of Australia’s external position than the current account estimates. The import data is a useful gauge of consumer and business spending while exports reflect global demand as well as domestic influences such as drought.

• The National Skills Commission releases a monthly Internet Vacancy Index. The index is based on a count of online job advertisements newly lodged on three main job boards (SEEK, CareerOne and Australian JobSearch) during the month. The index is the only publicly available source of detailed data for online vacancies, including around 350 occupations (at all skill levels), as well as for all states/territories and 37 regions.

What are the implications for investors?

• The big test that lies ahead for the economy is the expiry of the JobKeeper wage subsidy. But all the indicators currently suggest that the expiry won’t represent a road block for the economy – more like a speed hump.

• Focus needs to be on the labour shortages that have emerged and are emerging. The aim is to ensure that Australia has the necessary skills to drive the economic recovery over the next few years.

• Imports of road vehicles (cars) lifted $705 million or 24 per cent in February, allaying concerns about the shortage of stock that has been propelling new and used vehicle prices higher.

• Australia’s dependency on China continues. Around 40 per cent of exports are sent to China. And just under 30 per cent of imports come from China.

Published by Craig James, Chief Economist, CommSec