Before the surprise rate cut decision yesterday afternoon we had more detail on the way the economy performed in March – and there was no real change. House prices were not as strong as expected in the quarter (perhaps the economists making their estimates were too optimistic) and the trade account moved back into the black for the first time in 15 months.
Perhaps the weaker than expected rise in house prices and the weak building approvals data last week for March helped sway the bank’s hand and brought on a rate cut, instead of no change.
Certainly while parts of the economy are weak, there are signs of an upturn in activity in some areas.
While March retail sales surprised with a fall of 0.4%, and brought the usual run of nonsense stories about how retailing as doing it tough, the sector isn’t as slow as it was in the latter months to 2012 and the upturn which started in January is continuing (although at a slower pace).
The media reports and analysis of the March figures mostly failed to point out that that was after not only the strong 1.3% rise in February, but that the growth in January was again revised upwards to 1.3%, from 1.2% estimated in last month’s report, and the original 0.9% report from February.
All up, the Australian Bureau of Statistics (ABS) says that in volume terms, turnover rose 2.2% per cent in the March quarter, seasonally adjusted, following a rise of 0.1% in the December quarter of 2012. That should make for a tidy positive contribution to first quarter economic growth when the national accounts are released on June 5 (the day after the next RBA board meeting).
Australia Retail Sales MoM – YTD
With the strength in retailing, as reported by the ABS, it’s no wonder that JB Hi-Fi upgraded its 2012-13 results off the back of a 10% plus in first quarter sales (and 1.3% on a same store basis). The question now is whether the stronger conditions have benefitted all of retailing, or just some sectors (we know that Woolworths’ and Coles basic’ supermarket businesses are seeing an improvement, but not Target).
The ABS pointed out that in trend terms, retail trade is maintaining its start of year strength. It was up 3.2% in March, unchanged from the February rise, which was up sharply from the 2.5% annual rate in January and December (2012). Some of this would be down to higher levels of consumer confidence and the continuing solid jobs data. (April’s figures are out tomorrow).
We should remember that car sales remain solid (car sales are a part of retailing, but not covered in the Australian data, unlike the US).
And in the trade data, the return to the black was off the back of a 1% rise in exports and a 1% fall in imports, and reasonably strong prices for iron ore and coal and higher volumes of exports for iron ore and soft coking/steaming coal. the surplus seas $307 million, compared with the $111 million in February.
March was the first monthly trade surplus for more than a year and continues the improvement since November of last year. The size of the improvement can be seen from the dramatic plunge in the size of the deficit in the March quarter to $946 million, a fall of $3.86 billion or 80% from the December quarter. Exports to China jumped as shipments of iron ore rose strongly.
"However, if seasonal factors used in compiling the quarterly balance of payments are applied, the preliminary March quarter 2013 deficit was $306m, a fall of $4,952m (94%) on the revised December quarter 2012 deficit of $5,258m," the ABS commented. Many economists and other analysts failed to spot this improvement and still reckon the trade account will weaken. It hasn’t so far, it might in future months, but our export performance has been pretty solid.
And the ABS said house prices edged up by a mere 0.1% in the March quarter, much slower than market estimates for a rise of 1.8%. Private forecasts said house prices were also weaker in April. For the year to March, prices were up 3.6%.
Darwin saw prices up 1.9%, while Brisbane and Hobart saw falls of 0.3% each. Sydney was flat.
