Signs that the Australian economy might be back on its downward track.
The December stimulus had an impact on retail sales and on confidence levels and possibly on some newspaper ads.
Retail sales in December rose 3.8%, business confidence picked up, but the likes of David Jones and Myer still did it tough, as did Harvey Norman.
Yesterday the best performing retailer in the country, JB Hi-Fi revealed record sales and profits for the December half, and maintained a confident outlook for the full year.
It was a result that seemingly confirmed the more buoyant December.
Monday the ANZ jobs figure for January was down for a ninth month in a row, yet newspaper job ads surprisingly rose and the internet was very weak. The overall fall was the smallest since October.
And now the National Australia Bank’s January business confidence survey tells a different story with business confidence reversing December’s gains and tumbling to a record low in January with the outlook for employment and forward orders hitting recessionary levels.
Today we get housing finance, which should show a pick up in first home owner interest, but tomorrow the January jobs figures, which will go a long way to telling us how bad conditions are in the economy, and whether we will get a further rate cut next month.
The NAB said companies’ confidence dropped to minus-32 index points last month, a new low for the 12-year history of the National Australia Bank’s survey. That compared with December’s improvement to minus-20, following November’s minus-30 reading.
The index has now been in negative territory since January last year, indicating pessimists outnumber optimists in the survey.
”It needs to be noted that the survey was largely completed on the Monday prior to the announcement of the Government’s new fiscal package and the RBA’s rate cut,” said NAB group chief economist Alan Oster in a statement. ”As such confidence may have improved a touch since then.”
"Business conditions fell 5 to overall reading of -11 index points – taking the index back to levels reported in October and half reversing the Government package inspired jump in December.”
"Falls in confidence and conditions were broadly based. That includes retailing & wholesaling – with the latter sector’s confidence level at record lows (-51 index points).
"Forward orders & employment remain around recessionary lows, while capital spending and capacity utilisation fall further. Exports also sharply lower. Falls, by industry, very broad based.
"Survey implies around no growth (or slight falls) in domestic demand in early Q1 2009."
All in all the contrast between the still cautious optimism at JB Hi Fi and in the NAB survey was telling:
"Sales in January and February to date have met internal expectations," the company said in its statement this morning.
"Whilst the retail outlook is less certain than previous reporting dates, the company is cautiously optimistic that it will have another strong year and confirms its previous guidance that sales will be circa $2.35 billion or a 28% increase on the prior financial year."
That’s at variance with the NAB’s survey’s results and indicates that JB Hi Fi is the exception in local retailing.
The NAB said the level of credit availability was broadly unchanged as the proportion of firms not wanting finance, again rose. (Because demand is not there.)
The NAB left its January downgraded forecasts for the economy unchanged with Gross Domestic Product expected to fall by 0.25% in 2009 – "a moderate recession" and "no aggressive kick back in growth in 2010".
The NAB said it is more pessimistic than the federal government It said the Reserve Bank will cut interest rates to 2% (no change in forecast) by mid-year as unemployment rises.
Macquarie interest rate strategist, Rory Robertson said in his newsletter last night that "The RBA could easily pause in March, with further rate cuts "spaced out" over time. In any case, further cuts are much more likely to come in 50bp lots than in 100bp lots.
"The RBA obviously is well aware that the deepening global and local recessions will drive unemployment significantly higher.
"At this stage, however, no-one in the official family -neither the RBA nor Treasury – is forecasting unemployment heading into the double-digit rates seen in the early 1980s and the early 1990s.
"After having delivered an appropriately aggressive response to the post-Lehmans collapse in global growth prospects, the RBA now can make a respectable case to wait and watch for a while, if it chooses.
In terms of its March decision, no doubt much will depend on the extent of weakness highlighted in Thursday’s jobs report."
