– April 2020 INSIGHTS BY THE CURVE TEAM –
- The outlook for the economy continues to develop as the fight to contain Covid-19 remains the focal point.
- At their emergency meeting the RBA cut the cash rate to the lower bound of 0.25% and commenced quantitative easing to support the economy.
- Volatility across markets has continued with the focus on the health fight, not the longer-term implications for the economy.
- While the near-term outcomes will be determined by the health crisis, longer term implications are starting to emerge.
Australian Economic Highlights
Growth ticked up slightly in Q4 for 2019 printing at 0.5% for the quarter bringing the annualised rate to 2.2%. Despite an indication that growth may be at a gentle turning point recent events could see large changes when Q1 data arrives.
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 for February, which pre-dated the slowdown saw total employment grow 26,700 which saw the unemployment rate fall to 5.1%. Due to the timing of the March survey it is unlikely to capture the full effect of the shutdowns meaning we are unlikely to know the true impact until the April data is available in mid May.
ANZ Job ads collapsed 10.3% in March as the economy was shuttered to fight the spread of Covid-19. More up to date data from private sources such as Seek and Indeed suggest that job ads are currently down over 60% from the corresponding month a year ago. The falls across different categories range from -29.7% in mining and energy which is the smallest fall to -97.7% in sports and recreation job ads.
Business confidence fell heavily in February, losing 3 points to post at -4 for the month. Business conditions also fell at 0 points for the month. The crucial Employment index gained 1 point to post at 2 points for the month.
Consumer confidence fell in March with the index down 3.8% to 91.9. We are likely to see a more substantial fall in the April survey when it is released this week. The weekly ANZ-Roy Morgan survey suggests the index will breech its GFC lows.
- Retail sales held up ok at the headline level in February thanks to a surge in food sales leading into partial shutdowns of the economy. Food sales jumped 0.8% over the month driven by grocery sales which were up 1.1%. Given the widespread shutdown, sales will be significantly lower over the months ahead.
- Housing finance has slowed materially during the first two months of 2020 after ending 2019 at a solid growth rate. January’s initial solid increase was largely revised away while February saw large declines for the value of both owner occupier and investor loans.
- Australia trade surpluses fell in February but not by as much as had been expected. The surplus printed at $4.4bln against expectations of $3.8bln. However the headline number masked the deterioration in trade flows which saw exports fall 8% over the month while imports were down 4%.
- Building approvals posted an unexpected jump in approvals in February after January’s sharp falls. Approvals were up 19.9% in February, driven by apartment approvals in Victoria after January’s 15.1% fall.