The EL Consult executive demand Index for November made gains of 11% after losses in other months, including October when the sector declined.
According to EL Consult, the IT sector benefitted in November with gains in Western Australia, Queensland and the ACT “providing the conditions for the overall result”.
But, losses in Victoria’s IT sector gave some negative impetus to demand, according to EL managing director Grant Montgomery.
On a national basis across all business and industry sectors, executive demand rose a further 1% in November compared with the prior month, benefitting from a surging US dollar and a recovery in resources prices.
EL says the rise means the Index is close to its 2016 highs and remains near its highest point since 2013 – a result Montgomery says was driven mainly by a stronger US dollar coupled with a small recovery in resources prices.
“In the past two years there has been significant and consistent growth in demand and this is a good sign for the Australian economy overall.
“Too much has been read into a single quarter drop in GDP. Our figures show economic activity has been slowly improving from the shock of the GFC.
“Perhaps Australia could improve faster but with the smorgasbord of international influences from China growth, trade deal uncertainty, Brexit and countless others it is not tracking too badly.
“We are now back to the levels of economic activity not seen since June 2013.,” Montgomery notes.
According to Montgomery , in 2016 we are seeing a “repairing“ kind of economy as it “lifts itself off the canvas after the GFC and the resources price destruction”.
“The last two years have been bit by bit recovery in executive demand but it is slow – no huge spikes,” Montgmery notes, adding that “infrastructure spending, the stimulus recommended by the IMF, is continuing and growing in NSW as can be seen by the demand for engineering putting it well ahead of the other states”.
Montgomery says the single quarter GDP result does not show the real picture. ”Western Australia comes back to life as resource prices recover. ICT surges 11%,” he notes.
And, Montgomery says the EL Index is a good predictor of economic health as executives are hired when companies are anticipating expansion and are the first to be retrenched when company needs to cut back. “For this reason it leads other indicators like capital investment and even general employment by several months.
“Infrastructure spending, the stimulus recommended by the IMF, is continuing and growing in NSW as can be seen by the demand for engineering putting it well ahead of the other states,” he says.
But for November the other main driver, residential housing construction, is pulling back slightly, “as the banks get jittery about their massive residential loan portfolios”. Montgomery observes.
“Residential housing is not an investment for the timid but continual shortages of availability is going to keep pushing the returns and boost employment demand particularly in NSW and Victoria.“
Montgomery also said there was a welcome demand increase in Western Australia in November.
“Western Australia in particular has been a very poor performer but slowly improving resource prices in particular are showing this is getting better.” he said.
“Five years ago in 2011, when the iron ore spot price was US$187 a tonne, executive demand in Western Australia was over 400% higher than today with a spot price at around US$70.
“Five years ago Western Australia provided 16% of overall Australian executive demand. Today it is providing only 4%.
“But this month seems to be finally showing some recovery with Western Australia and Queensland both showing positive gains in jobs," Montgomery says.
Higher results were recorded by EL in Queensland, Western Australia and Victoria, while losses were experienced in New South Wales, Tasmania, South Australia, the Northern Territory and the ACT.
On a sector basis, engineering resumed its upward march by gaining a further 15% in November with the majority of the gain coming in New South Wales. “Information Technology and Marketing also gained after losses in the prior month,” Montgomery concludes.