Australia's Economy Survives a Slowdown in China

For better or worse, investors have come to regard Australia as an economic satellite of China. The gravitational pull exerted by China’s appetite for Australian iron ore, wheat, and other commodities was the main reason the nation of 23 million managed to avoid recession during the global financial crisis. Yet the latest data show that the two economies may be decoupling. For Australia, the timing couldn’t be better: Judging from the most recent numbers on factory output, investment, and retail sales, China may have a difficult time attaining the 7.5 percent annual growth target set by Premier Li Keqiang.

Analysts point to Australia’s rebounding jobs market and faster growth as signs that the country is defying the slowdown of its main trading partner. Citigroup’s Economic Surprise Index, which measures the gap between data reports and analyst estimates, gave a reading of 50.3 in March for Australia, up from only 9.3 three months earlier. (A positive reading means economic reports have been coming in above estimates.) The Citi index for China has been moving the opposite way, reaching –110.1 in March.