– JUNE 2018 INSIGHTS BY THE CURVE TEAM –
- The RBA left the cash rate on hold again in June and continues to see a gradual move towards achieving its forecasts over the medium term.
- Short term rates have started to pick up again with the slowdown in broad money putting pressure on funding markets.
- The Australian economy continues to keep on keeping on as exports underpin a solid pick up in growth in Q1.
- Risks to the domestic outlook remain centred on the consumer with wages still the key metric to watch in the context of the outlook for interest rates.
Australian Economic Highlights
- Growth for Q4 came in at 0.4%, short of both the market and RBA’s expectations. The economy grew just 0.4% in Q4 which saw the annual rate slow to 2.4% from an upwardly revised 2.9% last quarter.
- CPI was largely in line with estimates in the first quarter. While the annual rate of headline inflation was unchanged, the core rate edged higher thanks to revisions to previous quarters. It has the RBA suggesting core inflation has bottomed for this cycle.
- After a weak run over the past few months employment growth return in April. The Employment data showed total growth of 22,600 which was nearly spot on estimates. However the number of new jobs wasn’t enough to offset the growth in the labour force which saw the unemployment rate rise to 5.6%.
- After falling for three straight months the ANZ job ads report posted a solid bounce in May. Jobs ads were 1.5% higher over the months.
- The NAB business conditions index pulled back from its all time high of 21 in May with the index falling back to 15. Profitability, trading conditions and the employment index were all down. The Business confidence also eased back with the index back at its long run average of 6 from 11 the previous month.
- Consumer confidence slipped a little again in May but managed to hold above the key 100 level. The survey period straddled the release of the budget. Confidence was set to fall a little further but the budget was positively received, largely due to the announcement of tax cuts.
- After a soft first quarter, Retail sales improved a little in April. Total sales rose 0.4%, just ahead of estimates but the volatility amongst the components means it is too early to tell if discretionary spending set to pick up.
- Housing finance was generally softer again in April following the collapse in investor finance in March. Investor finance was down again in April with a small fall in value of loans. The number of loans to owner occupiers was also down while the volume of owner occupier loans was slightly higher.
- Australia’s trade balance has gone from strength to strength throughout the first quarter. After solid results in January and February, the trade surplus rose to $1.5bln in March. Net exports are expected to boost growth in the first quarter.
- Building approvals continued with their run of more stable month to month changes in April. While total approvals were down 5%, private house approvals continue to trend higher with the recent fall in house prices not yet impacting on approval levels.