Sunday, May 3, 2020

Australia--a tale of two PMIs

There is always a problem with sample surveys.  Because it would be far too expensive to contact every person, or every business, to ask how things are going, all surveys (except at a decennial censuses) pick out some sub sample of the population in question.  This means that even asking an identical question, we will get different answers because we'll be asking different people.  I've already often mentioned this with the US PMI  and ISM  surveys.  But the same issues are pertinent in surveys from other countries.  For example, in Australia, the AI Group, Australia's peak industry association, has been surveying its members since 2001, producing what everybody has called a PMI (Purchasing Managers Index).  The Commonwealth Bank has also been producing a survey of business conditions, based on a different sample, which it also calls a PMI.  Its survey only goes back a couple of years.

The Commonwealth Bank survey has less month-to-month volatility than the AI Group's survey, but the trends are very similar.   Both surveys point to a downturn, but the AI Group one has fallen more.   But it is also more volatile month to month, so may well rebound in May.  Zigs and zags.

The Australian Federal Government has put in place some intelligent measures to mitigate the effects of the downturn, and so far, it appears that this has helped.  The April PMIs released so far for several world economies all point to a downturn as deep as the GFC (2008-2009), but Australia's is not as bad.


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