Daily Commentary BY THE CURVE TEAM –

Economic Transition Seems To Be Underway

1st of September, 2017

Data continued to catch the eye of markets overnight. The release of capital expenditure and lending data domestically will certainly have garnered attention from the RBA.

Following on from Wednesdays strong construction work done data release, Q2 capex came in above market expectations. Total capex continued to consolidate with an increase of 0.8% for Q2, on the back of a surprise lift in equipment spending.

Whilst it is unlikely that this will have a drastic impact on next weeks GDP release, one of the key things to take away relates to the changing structural dynamics of the Australian economy. Expenditure from non-mining industries is expected to grow by 4.8% in 2017-18, this will definitely catch the eye of the RBA who will be watching carefully at the pace of non-mining recovery.

Australian private credit was the other key domestic release yesterday, with total credit increasing 0.5% for July. Following on from the strong business conditions we have seen of late, business credit growth has continued to lift into July.

Household debt has been a key focus for the RBA for some time now, and the lending data release indicated that acceleration in household leverage seems to be slowing, however growth still persists. With little to no pick up in wages, this will remain a key focus for the RBA’s outlook for growth and monetary policy.

These pieces of data tie in nicely leading into next week’s Australian Q2 GDP release, however the market will be looking carefully at US Non-Farm Payrolls out tonight. Whilst August is traditionally a slower month, markets are looking for momentum to continue.

Oliver Parsons

Client Relationship Officer