Housing approvals up, the trade deficit rises more than expected, housing finance down and a larger than expected fall in retail sales for the same month: July is shaping up as a very mixed start to the September quarter.
Job ads turned up in August, later today we find out about employment.
Yesterday we learned of a 1% drop in retail sales in July and a 2.3% fall in housing finance for the same month which should provide a reality check for everyone, especially the Federal opposition, who are claiming that Australia is out of the wood completely and back on the path to a boom.
That’s not to deny that conditions have improved. They have and Australia is in a much better position than many other economies.
But much of the improvement is on the back of stimulus spending in retailing and the potential surge later this year and in 2010 in home building, and then infrastructure spending.
The spending on schools is designed to help bridge some of the gaps between different parts of the stimulus.
But other demand is not very strong at all and business seems to prefer to run down stocks and import rather than crank up output.
Coming on top of the near six year high for business confidence, and solid rise in business conditions, plus the rise in newspaper and online job ads for the first time last month in over a year, the recession, or rather the slowdown is clearly over.
The Federal Opposition and the Greens have combined to force an inquiry next week into the stimulus spending, but the fall in retail sales and the easing in housing finance will make the government’s task of defending its spending much easier.
All we need now is a rise in unemployment later today and it’s back to the usual monthly argy bargy over interest rates.
News of the slide in retail sales and building approvals were released by the Australian Bureau of Statistics yesterday, just after the release of the September consumer confidence survey which showed a two year high in the latest data from Westpac and the Melbourne Institute.
But the retail sales figures contained a timely reminder that there could be a slowdown this quarter, perhaps into the December three months.
Reserve Bank Governor, Glenn Stevens warned of such a possibility in his post rate meeting statement last week when he said "Some spending has probably been brought forward by the various policy initiatives; in those areas demand may soften in the near term".
With that in mind, news of a slowdown in retail sales and housing finance (especially for the purchase of existing homes) will see some pressure off the RBA to lift interest rates next month.
The ABS said "The seasonally adjusted estimate of Australian turnover decreased 1.0% in July 2009. This follows a decrease of 0.8% in June 2009 and an increase of 1.2% in May 2009.
"In seasonally adjusted terms, Food retailing (-1.9%), Household goods retailing (-3.6%) and Clothing, footwear and personal accessory retailing (-0.6%) decreased in July 2009 while Department stores (+2.5%), Other retailing (+0.8%) and Cafes, restaurants and takeaway food services (+1.0%) increased.
"In seasonally adjusted terms, all states, except the Northern Territory, decreased in July 2009. States with the largest decreases were Queensland and South Australia (both -1.4%) and New South Wales (-1.2%)."
For housing finance the ABS said:
"In seasonally adjusted terms, the total value of dwelling finance commitments excluding alterations and additions decreased 2.3%.
"Decreases were recorded in both investment housing commitments, down 4.0% and owner occupied housing commitments, down 1.7%."
The AMP believes there’s a chance the economy should slow this quarter, although the NAB said Tuesday that the strong reading on confidence and improvement in business conditions could see some growth, then a slower December three months
The ABS said there was an increase in commitments to build new homes (up 2.6%) and to buy an existing new home (up 0.6%) but the proportion of first home buyers fell from 27.1% to 25.7%, while the share of fixed rate loans fell to 7.2% from 8% in June.
The figures showed that housing finance commitments for owner-occupied housing fell 2.0% in July, seasonally adjusted, to 63,259.
The result was worse than market forecasts of a 1.0% fall and the first monthly decline since September last year.
Both sets of figures for July came as consumer confidence rose in that month, then again in August, and rose again in the latest Westpac-Melbourne Institute September report.
Confidence is now at a two year high, having risen for the past four months in a row. But it is still well under the near six year high for business confidence that the NAB reported on Tuesday.
The Westpac Melbourne Institute consumer sentiment index leaped 5.2 in September, to the highest level since July 2007. The increase, the fourth in as many months, takes the index to 119.3 in September from 113.4 in August.
"For consumers, the good news on the economy is `drowning out’ any warnings on rate rises," said Westpac chief economist Bill Evans in a statement.
"Given the extensive media coverage of likely rate hikes it is surprising that
