– MARCH 2017 INSIGHTS BY THE CURVE TEAM –
- The RBA left the cash rate on hold again in March for the seventh straight month, leaving the cash rate at 1.50%.
- The RBA remains cautiously optimistic, buoyed by the bounce in growth.
- However the RBA is acutely aware risks to financial stability would be caused by a substantial further increase in debt levels.
- The data is in and suggests that the FOMC will be hiking rates when they meet later this week.
Australian Economic Highlights
- Growth bounced back in Q4 with GDP rising by 1.1% for the quarter. The pick up in growth saw the annual rate of growth rise to 2.4%, ahead of the RBA’s forecasts. The improvement in some sectors could prove unsustainable, casting a cloud over the outlook for growth.
- CPI was soft again in Q4. Headline inflation was up 0.5%, short of the 0.7% rise that was expected. The quarterly increase was still enough to lift the annual rate from 1.3% to 1.5%. The RBA’s preferred measure, core inflation, just missed expectations, rising by 0.4% which saw the annual remain largely unchanged at 1.5%.
- The employment data picked up in the new year where it left off, January saw a small beat on expectations with total growth of 13,500. There was once again a big swing towards part time which was up 58,300 while full time employment was down 44,800. The unemployment rate edged back down to 5.7% as the participation rate slipped back to 64.6%.
- After bouncing back in January, ANZ job ads came under pressure again in February, posting a decline of 0.7%.
- The NAB survey gave back the previous months bounce in February. The NAB business conditions slid from 16 to 9 driven by a sharp fall in trading conditions (23 to 13) while profitability and the employment index were also down. Business confidence also slid, falling from 10 to 7. Despite the falls, both measures are still above long run averages.
- Consumer confidence printed below the key 100 level for the third straight month in January as consumers remain cautious on their own finances, especially compared to a year ago even after two rate cuts last year.
- Retail sales started the year on a more positive note following December’s decline. Sales were up 0.4% for the month, which was in line with expectations.
- Housing finance bounced back in January thanks to investors after a subdued December. The number of owner-occupier loans were up 0.5%; however, the value of occupier loans was down 0.2%. Investors did the heavy lifting with a huge 4.2% gain in the value of lending.
- Australia’s trade surplus receded from its record high in December, posting a $1.3bln surplus in January, well short of the $3.8bln surplus that was expected. The trade surplus should bounce back as the weather related impact on exports fades over the coming months.
- Building approvals posted a small gain of 1.8% in January; however, it wasn’t enough to offset the revised fall of 2.5% the previous month. Building approvals remain well off their highs suggesting the construction boom is peaking.
- Motor vehicle sales built on their modest gain in December with a 0.6% increase in January thanks to a 6.3% jump in SUV sales. Despite the increase, sales are still lower than they were 12 months ago.