More signs from three sets of figures out yesterday of the slowing level of activity in the national economy.
Import figures and lending finance numbers issued by the Australian Bureau of Statistics showed definite indications of receding demand; while the TD Securities inflation gauge showed a sharp fall in inflation last month to a three year low.
All are the type of indicators that suggest the economy is slowing, although inflation is still being dragged lower by weakening oil and petrol prices, as is the value of imports.
It means the likelihood is for a rate cut of 0.50% when the Reserve Bank board meets on Tuesday February 3.
The trio of figures put some meat on the assertions from Access Economics that recession lies ahead for the Australian economy, with NSW also there and Victoria supposedly on the brink of tipping over.
The ABS figures for lending finance for November showed distinct signs of the slowdown in economic activity with total personal finance commitments down 1.8% in November, to $6.095 billion, from October.
The driver was a 10.4% slump in commercial finance, seasonally adjusted, to $28.375 billion, from $31.669 billion in October.
Lease finance fell 3.0% in November to $518 million, compared with $535 million in October as financiers exited the market or cut back their lending.
Housing finance for owner occupation rose 1.4% to $12.460 billion in November from $12.290 billion in October, as suggested in last week’s housing loan approval numbers.
The ABS said that import figures for December fell $432 million or 2% in seasonally adjusted terms from November.
In original terms the fall was 4% and the raw total of $20.13 billion was the lowest since August as oil and petrol prices continued to fall, despite the drop in the value of the Australian dollar.
The ABS said that "preliminary analysis shows that goods imports (debits) on a balance of payments basis decreased by $432m (2%) in seasonally adjusted terms between November and December 2008.
Other goods fell $766m (41%) with non monetary gold down $668m (45%). Intermediate and other merchandise goods fell $623m (7%) with fuels and lubricants down $334m (14%) and parts for transport equipment down $102m (12%). Capital goods rose $872m (20%) and Consumption goods rose $85m (2%).
And the TD Securities/Melbourne Institute inflation gauge showed another sharp fall, driven lower by the fall in petrol and oil costs as well.
The gauge suggests consumer price inflation fell to its lowest level since 2005 in December.
The inflation gauge fell 0.2% in December, on top of a 0.6% drop the month before and the October 0.2% fall.
TD Securities said this was the first time in the history of the series that the gauge had fallen for three consecutive months.
It said annual inflation slowed to 2.2%, from 3.0% in November, the lowest since May 2005 and a long way from June’s peak of 4.8%.
And in the first significant forecast, broking house, UBS says we can look for a slide in December quarter inflation when the official CPI is released next week.
UBS said in a client note that its survey points to a sharp slowing in inflation from strong rises in recent quarters, and more in line with clearly slowing domestic/global demand through 2008.
"Hence, we lower our Q4 CPI forecast to -0.2% (was +0.1%), with core unchanged at 0.8%. The year on year pace of CPI drops to 3.8% (was 4.1%) from 5.0% in Q3 (well below the 5% forecast in the RBA’s November Statement), while core moderates to 4.4% from 4.7% (in line with RBA’s 4½% forecast).
"Although less improvement may be disappointing, we don’t see another high quarter limiting the RBA easing another by 125bp to 3% by May, given the poor growth outlook.
"Our survey shows surprisingly strong price gains for milk, cheese and ice-cream, while fruit & veggies rose solidly, partly offset by a fall in bread.
“Elsewhere, petrol prices plunged 18½%, along with seasonal falls in audio visual & pharmaceuticals, we estimate goods dropped 0.8%.
"But, services kept upward pressure, limiting more significant improvement. In particular, with ongoing strong gains in rent and financial services (though holiday travel looks weaker), we forecast a 0.8% rise.
"In terms of risks to our forecasts, our surveyed retailer front page discounts, anecdotally tighter margins, slowing demand and global inflation surprising lower, all suggest modest downside risk.
"While a sharply lower AUD argues for imported inflation amid upstream price pressure, massive global disinflation (even deflation) from plunging commodity (oil) prices – and lower capacity utilisation – probably means this is unlikely to have had a material upward impact on prices," UBS economist Scott Haslem said in the note.
And Friday fortnight we get the latest view on the economy from the Reserve Bank when the first Monetary Policy Statement of the year is released.
