Australia, being one of the world's biggest commodity producers, finds itself at the very beginning of the global supply chain for infrastructure investment and many manufactured products. It makes sense then, that magnitude and directional changes in the pace of global investment and consumption would be felt first in Australia. With that concept in mind we highlight that today's decline in Australian consumer confidence seems to be pointing to another "growth problem" both in the US and in China.
In the first chart below we compare Australian consumer confidence (red line, right axis) with the US ISM PMI (blue line, left axis). The divergence between the two has never been greater and if history is a guide we would expect the ISM to catch down to the Australian consumer confidence index, as Australian consumer confidence tends to lead the PMI by about two months.
In the next three charts we show Australian consumer confidence (red line, right axis) overlaid on the China leading indicator (chart 2), China manufacturing PMI (chart 3) and China industrial production (chart 4). In each case the Australian consumer confidence series leads the other series by two to three months and in each case Australian consumer confidence is pointing to lower readings of economic activity in China.