Daily Commentary BY THE CURVE TEAM –

Domestic Data Misses Again While Geopolitical Uncertainties Intensify

13th of March, 2019

Over the past 24 hours, key domestic data releases confirm downside risks to the economic outlook while geopolitical tensions intensify.

Following the volatility in the survey over the past 2 months, yesterday’s Nab Business survey confirmed the “relatively sharp decline over the previous 6 months”. Both business confidence and business conditions have fallen below long run averages consistent with the weak growth figures we have seen over the past six months.

While the employment sub-index held steady, there were however further declines in capacity utilisation which doesn’t bode well for the employment outlook. The fall in capacity utilisation and the ongoing decline in the ANZ jobs ads report both point to upwards pressure on the unemployment rate over the months ahead.

January lending data was also released yesterday with investor loans falling 4.1% and owner occupier loans dropping 1.3%, in line with the sharp decline in house prices in January. A continuation in house price falls in February suggests that there was little improvement in housing finance last month.

Moving offshore, Brexit news continues with UK Prime Minister Theresa May taking a revised withdrawal agreement to Parliament overnight. However prior to the parliamentary vote, the UK Attorney-General stated that the revisions made no material difference, and as a result May faced another defeat. The uncertainty continues with a vote on a ‘no deal’ Brexit expected in the next 24 hours.

Shifting to the US and headline annual rate of inflation dipped to 1.5% in February , while the core rate eased to 2.1%, still above the FOMC’s target level. Following the data and the failed Brexit vote, bond markets rallied, pushing yields lower as global economic uncertainty grows. It didn’t help that Trump’s top trade negotiator, Robert Lighthizer, cast doubt on the prospects of a trade deal, saying that “major issues” must still be resolved.

Neyavan Suthaharan

Client Services Officer