The Queensland Treasurer Curtis Pitt issued an upbeat media release on the Queensland economy yesterday, but I am unsure the Queensland Treasury gross state product (GSP) data he quotes should be interpreted as optimistically as he interprets them. The media release begins:
“Key statistics released today show Queensland’s Gross State Product — a key measure of economic growth — accelerated to 2.6% for the year to the September Quarter 2015.”
That is correct based on the so-called trend estimates, which are derived by applying a statistical filter to the seasonally adjusted GSP series to smooth it out. An important consideration is that smoothing procedures are much less accurate for the most recent values of time series, because the future data points that would help determine the direction of the trend have not yet been observed. Hence trend estimates can mask turning points in time series (e.g. when an economy enters a downturn) because they give too much weight to past observations.
So economy watchers should examine the seasonally adjusted data as well as the trend data. Alas, the seasonally adjusted data are not so rosy for Queensland. The seasonally adjusted data show a lower through-the-year growth rate of 1.9%, rather than the 2.6% in the trend data, and, more worryingly, a fall in GSP in September quarter of 1%, compared with growth of 0.9% according to the trend data (chart below).
To some extent, this GSP decline in September quarter could reflect statistical noise, but the decline should caution anyone against placing too optimistic an interpretation on the recent GSP data from Queensland Treasury. The seasonally adjusted data suggest the Queensland economy is being adversely impacted by declines in both private and public sector investment spending.