– FEBRUARY 2020 INSIGHTS BY THE CURVE TEAM –
- The RBA left the cash rate on hold at 0.75% in February, as was widely expected.
- Recent employment and inflation data was enough to support the RBA’s ‘gentle turning point’ narrative.
- In their recent commentary the RBA outlined what would be seen as a trigger for further rate cuts.
- Despite the RBA’s panglossian view on the outlook, risks remain skewed to the downside.
Australian Economic Highlights
Growth was below estimates in Q3, with the economy only growing by 0.4% as the weakness from the second quarter continued. The annual pace of growth remained low at 1.7% and is likely to undershoot the RBA’s estimate this quarter.
Inflation pressures rose slightly in Q4, with both headline and core inflation printing in line with expectations. The headline index was up 0.7% which saw the annual rate edge up to 1.8%, while the trimmed mean was up 0.4%, leaving the annual rate unchanged at 1.6%. Both were in line with the RBA’s forecasts.
Employment data was above estimates in December, with a gain of 29,000 jobs over the month. The unemployment rate edged lower to 5.1% with the participation rate steady 66.0%.
ANZ Job ads gained back some of the lost December ground in January, up 3.8% after falling 5.7% in December. Despite the volatility the series trend still appears to be in decline.
Business confidence remained in negative territory in January, despite gaining 1 points to post at -1 for the month. Business conditions also held steady at 3 points for December. The crucial Employment index also lost 3 points to post at 1 points for the month.
Consumer confidence fell in January and resumed recent run of soft prints. The index posted a 93.4 reading, which was a 1.8% fall over the December reading.
- Retail sales had positive quarter in Q4 despite a negative print for the month of December. Despite the quarter printing 0.5% above the zero expectations it is too early to tell if this result is mere noise or reversal of the downward trend.
- After a mixed run of data, housing finance was slightly up in December. The value of new credit to owner occupier’s continue to rise but by a reduced rate, printing at 2% for the month. Growth in outstanding credit continues to slow as mortgage holders continue to repay their loans quicker thanks to interest rate cuts.
- Australia continues to post robust trade surpluses, chalking up another $5.2bn in December, down slightly on November’s $5.8bn. The decline was largely centred on reductions of commodity exports, which are rescinding from recent highs.
- Building approvals were largely unchanged in December with a decline of 0.2%, after the strong recent downtrend the market looked favourably upon the recent stability.