– JULY 2017 INSIGHTS BY THE CURVE TEAM –
- The RBA once again elected to leave the cash rate on hold at 1.50% following their July Board meeting.
- In the statement, Governor Lowe elected not to join the chorus of other central banks’ recent hawkish comments on monetary policy, maintaining a cautious outlook.
- Supporting this view, were comments from RBA board member Ian Harper, who said that there is no reason “to scare the horses at the moment.”
- While the RBA remains staunch in its outlook, markets took their lead from the other central banks’ hawkish comments, with the yield curve finishing the month significantly steeper.
- The market moves come despite growing indecision among Fed board members’ current assessment of the ‘transitory’ pullback in economic and inflation data.
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 in line 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 for the third straight month in May with total employment rising by 42,000 after the upwardly revised 46,100 last month. The monthly increase saw the unemployment rate fall to 5.5%, even with the participation rate up 0.1%.
- ANZ job ads strengthened in June, posting a gain of 2.7% after May’s more moderate increase of 0.4%.
- The NAB business conditions index lifted again in June with the index rising to 15, remaining well above the long run average of 5. Business confidence on the other hand remained a little softer with the index only up 1 point to 9.
- Consumer confidence printed below the key 100 level for the seventh straight month in June, with the weakness in confidence becoming more broad based, rather than just centred around family finances.
- After a weak start to the year, Retail sales were again a little firmer in May with total sales rising 0.6%. There appears to be a welcomed pick up in discretionary spending heading into the end of the financial year.
- 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 was continued to fall, dropping down 1.4%.
- Australia’s trade surplus increased significantly in May, rising to $2.47 bln from April’s $555m. The main driver was the rebound in coal exports, which jumped 62%, more than reversing the prior month’s soft figure on the back of Cyclone Debbie.
- Building approvals resumed their downtrend in May, after a short-lived reprieve in April. Total approvals were down 2.6%, taking the year-on-year figure to -19.7%, and down 25% from their peak in August last year.
- The uptick in Motor vehicle sales resumed in May with sales posting a 2.9% increase in comparison to April’s revised uplift of 0.6%. This boosts the year-on-year figure to 4.9%.