– FEBRUARY 2017 INSIGHTS BY THE CURVE TEAM –
- The RBA left the cash rate on hold again in February at 1.50% after cutting by 0.25% in May and August last year.
- Despite the unexpected fall in GDP in Q3, the RBA remains optimistic.
- Their latest forecasts see growth bouncing back to 3% and accelerating by the end of the forecast period.
- Any miss from growth over the first half of this year could leave the RBA stuck between a rock and a hard place.
Australian Economic Highlights
- Growth disappointed across the board in Q3 with GDP falling by 0.5% for the quarter. The sharp fall which saw most components of growth fall, saw the annual rate decline significantly from 3.1% to 1.8%, well below the RBA’s forecasts.
- 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 finished off this year with a steady gain of 13,500 jobs. Full time employment rose by 9,300 whilst part time employment was up 4,200. The unemployment rate edged higher once again to 5.8% as the participation rate continued to rise, hitting 64.7%.
- ANZ job ads bounced back in January after a disappointing end to the year, positing a gain of 4.0%, more than offsetting the revised 2.2% decline in December.
- NAB business conditions built on Decembers improvement, jumping from 10 to 16 in January a multi year high thanks to broad bases gains across all sectors. Business confidence also improved after tracking sideways of late with a rise in the index from 6 to 10.
- Consumer confidence printed below the key 100 level for the second straight month in December as consumers remain cautious on their own finances, especially compared to a year ago even after two rate cuts last year.
- The rebound in Retail sales finished the year with an unexpected decline, falling 0.1% leaving total sales unchanged for the last two months of the year. Despite the weakness in the quarter which saw sales grow by 0.45%, sales ex-inflation for the quarter were up 0.9%, confirming the significant price pressure weakness in retail at present.
- Housing finance a little more subdued in December after a bumper increase in November. The number of owner-occupier loans were up 0.4% with the value of occupier loans also up 1.3% while investor lending fell 1.0% after a huge 5% gain the previous month.
- Australia posted its biggest ever trade surplus in December at $3.5bln, adding to the revised surplus of $2bln the previous month. Despite the huge turnaround in the trade balance in Q4, it is not expected to add much to real GDP over the quarter.
- After bouncing back in November Building approvals continued their slide in December, posting a fall of 1.2%. The December reading has resulted in the annual rate of building approvals falling 11.4% from a year ago suggesting the peak in the construction cycle is behind us.
- Motor vehicle sales posted a small gain in December after two straight months of declines. The 0.3% gain in December was enough to lift the change into the black with a small increase of 0.2%.