– APRIL 2018 INSIGHTS BY THE CURVE TEAM –
- The RBA left the cash rate on hold yet again in April but surprised with increased rhetoric on state of global economy.
- Short term rates have continued to drift higher with BBSW-OIS spreads putting pressure on bank funding costs.
- The FOMC, as widely expected lifted rates and dot plot indicated more hawkish sentiment amongst members.
- There are a growing number of uncertainties taking shape with geopolitics casting doubt over the integrity of markets.
Australian Economic Highlights
- Growth for Q4 came in at 0.4%, short of both the market and RBA’s expectations. The economy grew just 0.4% in Q4 which saw the annual rate slow to 2.4% from an upwardly revised 2.9% last quarter. The most recent RBA statement reflected a less optimistic view on growth for the rest of 2018.
- CPI continued to disappoint, the headline figure only lifting 0.6% for the second straight quarter in Q4. The RBA’s preferred measure, core inflation also remained below the band at 1.9% after a quarterly increase of only 0.4%.
- Employment data continues to be a pillar of strength in the Australian economy with another 17,500 jobs added in February. The unemployment rate increased 0.1% to 5.6% that looks to be attributed to a small uplift in the participation rate.
- Following the negative result last month, ANZ job ads were flat at 0.0%. The previous month was revised from -0.3% to -0.4%.
- The NAB business conditions came off recent highs declining 6pts, however still remain strong at +14. The Business confidence also declined 2pts and now just sit above the historical average, this could be attributed to heightened volatility in financial markets.
- Consumer confidence remained steady in March following the volatility-driven fall in February. The index remains above the key 100 level, sitting at 102.7.
- Following on from a steady January result, Retail sales posted a significant gain of 0.6% for February, well above expectations.
- Housing finance looks to be stabilising as the value of approvals to both owner occupiers and investors were up in January.
- Australia’s trade balance rebounded after the previous deficit to record a surplus of $1.055bn in Q4. Non-monetary gold was one of the larger contributors, up 54% whilst imports on consumption goods was down 7%.
- Large swings in Building approvals continue to be seen as high density approvals rise and fall each month. Total approvals were down 6.2% following a sharp increase in the previous month.
- Motor vehicle sales woke from their slumber with a solid 4.5% to end the year in December. The increase saw the annual pace of sales rise from 2.1% to 6.7%.