Figures out this week will show that the economy was slowing in the March quarter, but there will be enough other data around this week to continue to suggest that we are not in danger of sliding into a big black hole like the US, Japan and Europe still find themselves in.
First quarter growth figures will shown a slump of between 0.2% and 0.6%, according to most economists, with figures due for release today and tomorrow to help complete the picture.
Of interest will be the level of revisions to the September and December quarter growth numbers: a positive 0.1% for September and -0.5% for the December quarter.
The other issue will be the savings ratio: will it be a strong 8.5% as it was first reported in the December quarter, or will it be revised down, and what will be the March quarter figure?
The government spending packages will go a long way to clipping the extent of the slide in the March quarter, but they will help boost initial estimates of the savings ratio.
Part of those packages is the first home buyers grant for new and existing homes.
It’s clearly having an impact, but won’t show up in the March quarter growth figures where the contribution from housing is again expected to be a drag on overall growth.
But it is definitely having an impact.
Despite the mixed nature of some figures (retail sales and building approvals), it’s clear that the economy is operating at levels well below capacity.
Credit growth figures for April confirm the sluggish rate of borrowing across the board, but not in one sector.
The developing boom in new home building is holding the sluggish Australian economy aloft, and is the only sector stopping credit from contracting overall.
Figures released by the Reserve Bank on Friday show that if it hadn’t been for another solid month of lending for housing, especially to owner occupiers and first home owners, then total lending in the economy would have contracted last month.
That was probably the case in February and possibly March
Total credit again rose by 0.1% over April 2009, following a similar rise over March. Over the year to April, total credit rose by 4.6%, down from the 4.9% annual rate in the year to March.
April’s rate was the slowest for 15 years: the last time we saw it so slow (besides March) was in 1994.
Housing credit increased by 0.7% over April, following an increase of 0.7% over March (restated from an original rise of 0.6%).
Over the year to April, housing credit rose by 7.1% down from the 7.2% rate in the year to March.
The RBA said the rise in housing credit over April was mostly due to growth in lending to owner-occupiers, although lending to investors also rose (that’s something that has started showing up in the housing finance figures from the ABS).
Owner occupied housing rose 0.8% in April for the third month in a row. The annual growth rate has steadied at 8.4%, the first time it has steadied for over two and a half years.
Lending to housing investors steadied at 0.4% growth in April for the second month in a row and is now well up on the low point of a fall of 0.1% last November.
Supporting the stronger credit figures for housing, a report from RP Data showed that Australian house prices have rebounded strongly in the four months to April.
Home prices in capital cities rose 2.8% in the four months to April, according to real estate research firm RP Data, "virtually wiping out" 2008’s 3% fall.(Source)
"Homes in every capital, except Perth, rose in value. Median home prices in the WA capital fell by 0.8 per cent to $466,385 after "spectacular" growth during the commodities boom."
Other personal credit fell by 0.3% in April, following a decline of 0.4%. The RBA said that in the year to April, other personal credit fell by 6.6%, "reflecting a large decline in margin lending".
Business credit fell by 0.5% in April, following a decline of 0.6% in March.
"Since its peak in November 2008, the decline in business credit has been due to falls in foreign currency denominated lending.
"Over the year to April, business credit rose by 3.5%, down from the 4.1% annual rate in March, the RBA said.
The fall in business lending also helps explain the slowing in new private capital spending seen in the March quarter figures which were released yesterday.
"The annual growth in business lending is well down from the 13% plus in April of 2008 and the 23% rates in the closing months of 2007.
Meanwhile Japanese industrial production rose for a second month in April, but unemployment rose, hitting a 5 year high and consumer spending and retail sales again fell.
Factor output rose 5.2% from March, when it gained 1.6%. That was better than forecast, but is still a shock 31.2% down on April 2008, according to figures from the Trade Ministry.
"It was the strongest monthly rise for 56 years, but it was dwarfed by the record 10% plus fall seen earlier in the year. (Source)
But it is good news, and was forecast by the Trade Ministry in its forward looking estimates last month which picked up plans by car companies and other companies to restart production lines or expand output.
The department says those forward estimates point to an 8%-pl
