Slowing house prices, accelerating Chinese manufacturing, a loosening Fed and subdued Australian manufacturing, all will be on the agenda at today’s RBA board meeting.
We have already seen the reports on China and house prices, now for local manufacturing, where there was again a contractionary reading, but nowhere as sharp a slowing as we saw in September.
The Australian Industry Group-PricewaterhouseCoopers Performance of Manufacturing Index (PMI) rose 2.2 points to 49.4 in October.
That puts it just on the cusp of expansion, being just under the 50-point level that separates expansion from contraction.
"Manufacturers again cited the strong Australian dollar and sluggish domestic demand as having an impact on growth," the survey said.
It also showed the strong rebound in activity across clothing and footwear and machinery and equipment was not enough to offset the steep decline in the textiles sub-sector, which was largely related to weak consumer confidence and a shortage of skilled labour.
Food and beverages and wood products and furniture also remained in negative territory.
But encouragingly, production levels and employment rose in October.
Australian Industry Group chief executive Heather Ridout said in a statement that manufacturers continue to be inhibited by strong overseas competition amid the strengthening Australian dollar, soft domestic demand and an intensification of skill shortages.
"While not confined to the west, skills shortages are particularly acute among Western Australian manufacturers," she said.
"The industry also remains wary of the impact of interest rate rises at a time when strong competitive pressures are ensuring that inflationary pressures remain moderate."
Meanwhile the private TD Securities/Melbourne Institute inflation gauge says consumer inflation rose 0.3% in October after a 0.1% rise in September.
On a year-on-year basis, inflation rose by 3.8%, well above the Reserve Bank of Australia’s 2%-3% target for inflation over time.
But seeing the report contains (for the quarter) readings from two months in the September quarter, when official inflation was up 2.8%, you’d be entitled to doubt this measure.
Contributing most to the overall change in October were price rises for automotive fuel, fruit and vegetables and insurance services, the survey showed.
These were offset by falls in prices for audio, visual and computing equipment, non-alcoholic drinks and snack food and alcoholic drinks.
And another factor the RBA will consider is the growth in credit.
The Bank’s own figures show that there’s no sign of a surge in lending, with home loans continuing to come off their stronger growth figures of earlier in the year.
The RBA said total credit rose by 0.1% in September 2010, following a similar rise in August. Over the year to September, total credit rose by 3.3%.
Housing credit increased by 0.6% in September, following an increase of 0.6% in August and 0.8% late in 2009.
Over the year to September, housing credit rose by 8%, but much of that growth came from accelerating lending to investors.
Private housing loans grew 7.9% in the year to October, the lowest annual rate since July 1998. It was down from the 10% annual rate at the start of this year.
"Other personal credit increased by 0.3 per cent over September, after falling by 0.2 per cent in August. Over the year to September, other personal credit increased by 2.8 per cent," the RBA said.
The RBA said business credit "fell by 0.9 per cent over September, following a fall of 0.7 per cent over August. Over the year to September, business credit declined by 3.7 per cent".
That is slowly growing after the sharp falls in early 2010 and in 2009.
