– NOVEMBER 2018 INSIGHTS BY THE CURVE TEAM –
- The RBA left the cash rate on hold again in November and then upgraded their forecasts in the subsequent quarterly Statement on Monetary Policy.
- However to achieve their forecasts the RBA require a number of assumptions around wages and the savings rate to materialise.
- The latest data on the housing market points to a further deterioration in the housing market over the months ahead.
- The biggest question that lies ahead might not be ‘when’ the RBA will hike the cash rate.
Australian Economic Highlights
- Growth remained strong for the second straight quarter with the economy growing 0.9%. Upward revisions to the prior three quarters helped lift the annual rate to 3.4%.
- CPI was a little softer than expected in Q3 with headline inflation rising 0.4% while core inflation rose 0.35%. The annual rate of headline inflation fell back below the RBA’s target band at 1.9%, while the core annual rate slid to 1.75%.
- The Employment data continues to post interesting outcomes. Despite total employment growth of only 5,000 new jobs in September the unemployment rate tumbled 0.3% to 5% thanks to a 0.3% fall in the participation rate. The underlying trend is still ok but forward indicators are starting to diverge.
- After three big falls the past four months, the ANZ job ads stabilised in October with a rise of 0.2%. Jobs ads are still higher than a year ago but it suggests slower growth ahead.
- Business confidence and Business conditions both continue to drift lower with the slip in condition consistent with what we have seen in the AiG PMI data of late. Despite the decline of late, conditions are still above the long run average. The employment index fell from 11 to 7 and while still strong, needs to be watched closely as further falls could seem employment growth slow.
- After back to back declines Consumer confidence consolidated in October with the index rising 1% to 101.5. Optimists still outweigh pessimists by a small margin but continued falling house prices and market volatility will likely weigh on confidence going forward.
- Retail sales missed estimates in September, positing a rise of 0.2%. It capped off a softer quarter for retail sales with total sales ex-inflation rising 0.2% in Q3 after rising 1.2% the previous quarter.
- Housing finance has completely capitulated the past two months. Owner occupier finance fell 3.89% in August and 4.24% in September to be down 7.74% over the year and 12.41% from its peak. Investor finance continues to slide, falling 2.82% to be down 34% from its peak.
- Australia’s trade balance continues to be a shinning light for the economy with a huge surplus of $3bln in September. However the run of big surpluses has been helped by a plateau in imports which have been unchanged over the past six months.
- After a sharp fall last month, Building approvals rose 3.3% in September thanks to a small bounce in apartment approvals in Victoria. The trend is still negative for building approvals and the construction PMI has also rolled over suggesting real activity is also now falling.