– SEPTEMBER 2017 INSIGHTS BY THE CURVE TEAM –
- The RBA once again elected to leave the cash rate on hold at 1.50% following their September Board meeting.
- Governor Lowe remained optimistic in the accompanying statement as data largely continue to support the RBA’s central forecasts.
- Growth bounced back in Q2 after a weather disrupted slowdown to start the year.
- There are growing concerns over the outlook for consumption which could threaten the outlook for interest rates.
Australian Economic Highlights
- Following a weather effected slowdown in Q1, Growth improved in the second quarter with the economy expanding by 0.8%. The Australian economy now holds the record outright for the longest run of growth without a recession at 104 quarters.
- CPI was weaker than expected in Q2 with the headline reading of 0.2% short of the 0.4% expected. The result saw the annual rate fall below the RBA’s target band. The RBA’s preferred measure, core inflation also remained below the band at 1.8% after a quarterly increase of 0.5%.
- The employment data remained strong for the fifth straight month with total jobs growth of 27,900 in July. It was enough to push the unemployment rate down 0.1%, even with a 0.1% increase in the participation rate.
- The outlook for employment remains strong with the ANZ job ads report sustaining its trend of robust growth. Job ads were up 2% in August after a 1.6% rise in July.
- The NAB business conditions index continued it’s strong performance in August with the index sitting at 15, remaining well above the long run average of 5. Business confidence posted an unexpected decline, falling 7 points from 12 to 5 and now sits below its long run average. One big positive was a jump in the employment index.
- Consumer confidence continues to languish as weak wages growth and tightening credit standards continue to impact family finances. The ongoing weakness is starting to show up to a greater degree in consumption data.
- Retail sales stalled in July with total sales flat from the previous month. The result was driven by sharp declines in discretionary spending while spending on food, the largest sector, was up 0.7%
- Housing finance continues to be impacted by the macro prudential restrictions imposed by the council of financial regulators. Owner occupiers along with first home buyers continue to borrow at a solid rate, with lending to this sector up 2.2% for the month while investor lending slumped 3.9%, resulting in overall lending falling 0.6% ex- refinancing.
- Australia’s trade surplus fell more than expected in July as the fall in the value of exports outpaced the fall in imports for the month. Volatlity in commodity prices continue to impact exports from month to month. The surplus declined to $460m, almost half the previous month.
- Building approvals continue to trend lower, with the bounce in June being short lived. Total approvals in July were down 1.7% to be down 13.9% over the past year.
- Motor vehicle sales struggled in the first month of the new fiscal year with total sales falling 2%. The fall left the annual increase in sales at 1.8%, well down on the previous month.