– OCTOBER 2019 INSIGHTS BY THE CURVE TEAM –
- The RBA cut the cash rate to 0.75% in October, taking it to a new low.
- Domestic data has shown little sign of improvement over the past month and employment data has actually deteriorated.
- The domestic outlook combined with the trend towards lower rates globally drove the RBA’s decision to cut rates again.
- Current trends, RBA rhetoric and market pricing all suggest that the RBA isn’t finished yet.
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 34.7k jobs added. Despite the high number of jobs created a concerning data point emerged, with a negative contribution from full-time role -15.5k and a positive 50.2K part-time jobs added. This saw the unemployment rate remain up at 5.3% along with yet another record high reading in the participation rate at 66.2%.
- The ANZ job ads stabilised with a small 0.3% increase in September, a significant uptick from a -2.6% print in August. This brings the year on year measure to -10.4%.
- Business confidence posted a 1 point loss in September with the index falling to zero. Business conditions also remains below its long run average, gaining 1pt to print at 2 for the month. The crucial Employment index, continued its uptrend, adding a further point to print at 3.
- Consumer confidence fell back below the crucial 100 level, registering at 98.2. The declines were in all but one of the core categories. Short term expectations 1 year forward fell in both household finance and economic expectation terms.
- After a soft second quarter, Retail sales edged up slightly in August. Despite the 0.4% gain market expectations for a large jump on the back of recent tax cuts haven’t eventuated in the data.
- 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 are dissipating.
- Australia’s trade surplus continued but fell back from recent records. The surplus came in at $5.9bln in August as solid revenues from exports, particularly iron ore and LNG continued.
- After a volatile few months, Building approvals continued their downtrend. Approvals fell a further 1.1% in August bringing their fall to almost 50% from their late 2017 peak.