– AUGUST 2017 INSIGHTS BY THE CURVE TEAM –
- The RBA once again elected to leave the cash rate on hold at 1.50% following their August Board meeting.
- In the statement the continued optimistic outlook was somewhat overshadowed by commentary around the recent rise of the AUD and its potential impacts.
- The RBA then elaborated on this in their updated forecasts for growth and inflation in the quarterly Statement on Monetary Policy.
- The key for the outlook for interest rates is how the risks to the outlook unfold over the second half of this year.
Australian Economic Highlights
- After bouncing back in Q4, Growth slowed considerably in Q1 with the economy expanding by 0.3%. The Australian economy has now equaled the record for the longest run of growth without a recession at 103 quarters.
- CPI was weaker than expected in Q2 with the headline reading of 0.2% short of the 0.4% expected. The result saw the annual rate fall below the RBA’s target band. The RBA’s preferred measure, core inflation also remained below the band at 1.8% after a quarterly increase of 0.5%.
- The employment data was firmer again for the fourth straight month in June with total employment rising by 14,000 after the revised 38,000 last month. Despite the monthly increase, the unemployment rate edged higher by 0.1% to 5.6% in line with expectations. The participation rate was also up 0.1%.
- ANZ job ads strengthened again in July, posting a gain of 1.5% after June’s stronger increase of 2.7%.
- After a 1 point downward revision in June, the NAB business conditions index continued it’s strong performance in July with the index hitting 15, remaining well above the long run average of 5. Business confidence strengthened above market expectations with the index firming to 12 from the previous months revision of 8.
- Consumer confidence once again printed below the 100 level for July, with the weakness in confidence becoming more broad based, rather than just centred around family finances.
- After the weak start to the year, Retail sales were again a little firmer in June with total sales rising 0.3%. The June result helped lift the quarterly inflation adjusted increase in sales to 1.5% which should help growth in Q2.
- Housing finance was mixed in May. The number of owner-occupier loans and the value of occupier loans were both up, rising 1.0% and 2.9% respectively while the value of investor lending continued to fall, dropping down 1.4%.
- Following the strong surplus in May, Australia’s trade surplus decreased significantly, falling to $856m from the previous revised $2.02bn. The main drivers were the drop in bulk commodity exports including coal and iron ore while imports were lifted by a one off increase in Civil Aircraft and telecommunication equipment imports.
- Building approvals came in well above expectations in June with an increase of 10.9%. This was driven by multi unit approvals which goes against the recent trend.
- The uptick in Motor vehicle sales resumed in June with sales posting a 1.2% increase in comparison to the upwardly revised May figure of 3.1%. This pushes the year on year figure to 3.6%