– September 2019 INSIGHTS BY THE CURVE TEAM –
- The RBA left the cash rate on hold at 1.00% in September, as was widely expected after lowering it by 25bp in June and July.
- Rates globally have remained at or near record lows with a number of other central banks cutting rates the past month.
- We got a number of updates from the RBA the past month that both provided clarity over the near term outlook but also posed more questions over the long term outlook.
- Given many keys risks to the outlook lie in foreign political dealing we will likely need to see resolutions in multiple domains before significant and sustainable growth can develop around the globe.
Australian Economic Highlights
- Growth printed in line with estimates again in Q2 with the economy only growing by 0.5% as the weakness from the first quarter continued. The annual pace of growth slowed further from 1.8% to 1.4% and is likely to undershoot the RBA’s estimate this quarter.
- Inflation came in slightly above expectations in Q2 with headline CPI printing at 0.6% for the quarter which saw the annual rate lift from 1.3% to 1.5%. The RBA has moved to using the trimmed mean as their preferred measure of core inflation and it increased by 0.4% for the quarter with the annual rate steady at 1.6%
- The employment data was well above estimates in August with 41.1k jobs added. Despite the high number of jobs created, a negative revision on the 0.5k to -2.3k in July, saw the unemployment rate remain unchanged at 5.2% thanks to yet another record high reading in the participation rate.
- The ANZ job ads continued is recent volatility with a modest 0.8% increase in July, a significant slowdown from a revised 4.9% print in July.
- Business confidence posted a 2 point loss in August with the index falling to 1 after July was revised upward to 3. Business conditions also remains below its long run average, losing a further 3 points to 1. The crucial Employment index, which fell to zero last month, bounced back slightly to 2pts, other business condition elements all fell heavily.
- Consumer confidence bounced back to the crucial 100 level, registering at a gain of 3.6%. The largest gains were in expectations of family finance for the forward 12 months and 5yrs with 9.6% and 4.5% gains respectively. A notable decline was seen in the unemployment expectations index which fell -0.8% to 133.3.
- After lacklustre first quarter, Retail sales have remained soft through the second quarter. After rising only 0.4% in June, July data provided a negative reading -0.1% .
- Housing finance showed signs of life in July with gains across the board. The value of owner occupier and investor lending were up over the month, rising 5.3% and 4.7% respectively. It appears recent headwinds to home lending to are dissipating.
- Australia’s trade surplus continued but fell back from recent records. The surplus came in at $7.2bln in July as solid revenues from exports, particularly iron ore and LNG continued.
- After a volatile few months, Building approvals continued their downtrend. Approvals are still down around 28.5% over the past 12 months and down almost 50% from their late 2017 peak.