– DECEMBER 2018 INSIGHTS BY THE CURVE TEAM –
- The RBA left the cash rate on hold again in December, leaving the cash rate on hold for the second consecutive calendar year.
- Data over the past month has disappointed with GDP growth slowing in the third quarter.
- As the data slows, the tide is slowly turning against the RBA’s outlook, setting up for an interest RBA Board meeting in February.
- What does that mean for the outlook for monetary policy in 2019?
Australian Economic Highlights
- Growth disappointed in the third quarter with the 0.3% increase only half what was expected. The annual rate slipped to 2.8% while the previous quarters 3.4% rate was revised down to 3.1%. The RBA’s forecasts for 2018 are now unlikely to materialise.
- 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. Jobs growth bounced back in October with jobs growth of 32,800. It had limited impact on the unemployment rate which remained at 5% as the participation rose once again.
- The ANZ job ads continues to suggest that jobs growth will moderate over the months ahead as growth in new ads remains softer.
- Business confidence and Business conditions both continue to drift lower. Business confidence and forward orders are below their long run averages. The employment index remains solid but if its continues its relationship with profitability then it can be expected to fall over the months ahead.
- Consumer confidence built on the uptick in October with a improvement across the board in November. The headline index was up 2.8% with the long run expectations for the economy positing the biggest gain over the month. That may change this month.
- Retail sales rose 0.3% inline with expectations in October. However in NSW, where Sydney house prices are leading the declines, has seen retail sales fall three of the past four months which could be a sign of things to come as house price declines spread.
- After capitulating over the past two months, Housing finance had a better month in October. Owner occupier finance managed to bounce back a little while investor finance was little changed over the month.
- Australia continues to produce a solid trade surplus. It was a little lower at $2.3bln in October after September’s near $3bln surplus as import growth outpaced export growth for the month.
- The recovery in Building approvals was short lived with total building approvals slipping 1.5% in October. The decline was offset somewhat by an upward revision to the previous month but what is clear is that the peak in construction is now behind us.