– JUNE 2017 INSIGHTS BY THE CURVE TEAM –
- The RBA once again elected to leave the cash rate on hold at 1.50% following their June Board meeting.
- Despite a slowdown in growth in Q1, the RBA remains optimistic about their forecasts.
- Growing risks to the downside could see further revisions to RBA forecasts in the coming months.
- Meanwhile the FOMC is still widely expected to hike rates again this week with the focus on their commentary around their balance sheet normalisation plans.
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 picked up inline with with market expectations in Q1. Headline inflation rose 0.6%, taking the annual rate up to 2.1% and back into the RBA’s target band. The RBA’s preferred measure, core inflation remained below the band at 1.8% after a quarterly increase of 0.45%.
- The employment data was firmer again in April with total employment rising by 37,400 after the solid increase of 60,900 the previous month. The monthly increase saw the unemployment rate ease back to 5.7% after the participation rate remained unchanged.
- ANZ job ads eased back in May after a solid rise in April, posting a gain of 0.4% after last months revised rise of 1.5%.
- The NAB business conditions index eased from a revised 13 to 12 in May, remaining well above the long run average of 5. Business confidence on the other hand fell heavily, dropping from 13 to 7 over the same period.
- Consumer confidence printed below the key 100 level for the sixth straight month in May as consumers remain cautious on their own finances. The ongoing weakness in sentiment is starting to impact consumption.
- After a weak run over the past four months, Retail sales were a little firmer in April. The headline increase in sale masked ongoing weakness in discretionary spending with the largely component, spending on food, accounting for most of the growth over the month.
- Housing finance ease back again in April, a trend we are likely to see continue as the effects of increased macro-prudential oversights come to the fore. The number of owner-occupier loans and the value of occupier loans were both down, dropping 1.9% and 1.1% respectively. The value of investor lending was down 2.3%.
- Australia’s trade surplus narrowed sharply in April, falling from $3.2bln to $555m. The main driver was a collapse in exports which were down 8% over the month on the back of a 45% fall in coal exports.
- After collapsing 10.3% in March Building approvals pared back some of the decline, rising 4.4% in April. Total approvals are still down 17.2% on a year ago and more than 20% down on their August 2016 peak.
- The uptick in Motor vehicle sales faded in April with sales only managing a 0.3% increase with sales now at the same level as a year ago.