Weak consumer confidence for March and a solid report on home lending for January cancelled each other out yesterday – now it’s the February jobs report later this morning for investors to contend with, while across the Tasman Kiwis are coming to terms with their first interest rate rise for three years.
The local market was gripped by a sense of selling panic at one stage yesterday morning – down more than 60 points as every man and his bear were waxing gloomy about the awfulness of iron ore, China and anything else. The Aussie dollar fell a cent to 89.50 USc (you could hear the Reserve Bank cheering quietly from its Martin Place HQ in Sydney, a point in most of the reports about the currency’s fall).
But by mid-afternoon, after consuming the consuming confidence data, and analysing the housing finance figures and taking a deep breath, the market rebounded, halving that 60 point loss in a couple of hours.
Yes, we all know that lower iron ore prices are not good for the economy or big miners, but we have been through this situation in mid 2012 and emerged OK, with Fortescue Metals (FMG) stronger as a result, something the hedge funds and other bears hope local investors always ignore – which they did on Monday and yesterday morning.
Looking at the wider economy the consumer confidence data was really all about a sharp fall in confidence among ALP voters.
The Westpac Melbourne Institute survey for March shows the number of pessimists passing the number of optimists for the first time since May 2013.
It fell to 99.5 points, down 11% on its post-election high of 110.3 in November. Qantas and tough talk from the Federal Government on jobs were blamed. The index fell 0.7 of a point from February, when it fell three points from January.
But the biggest movement over the past year has been in Labor voters – a fall of more than 33 points (to 84.5%). The 13.5 point rise in Coalition voters’ outlook not enough to make up for the slide in the Labor voters confidence in recent months.
But as to what this means – the story is mixed – it could mean voters, sorry consumers are a bit more worried about the economy and the immediate future, or it could mean nothing. But ALP voters/consumers are really worried about jobs and that means those concerns have to be taken into account by government and business – if they believe consumer sentiment surveys.
Analysts were on firmer footing when looking at the housing finance data for January – the value of housing finance commitments was flat in January, with the number of loans steady on 51,054. The market had been looking for a rise of half a per cent, which is hardly a guess, let alone a forecast.
The most interesting statistics from the report (for the wider economy) was the 5.8% jump in loans to build new homes in January from December.
Approvals to buy new homes fell 1%, while lending for already built houses was down half a per cent.
The value of loans for investment housing fell 3.3% in January from December, which will please the Reserve Bank.
January’s new building approvals jumped by almost 7% in January from December, and about 35% from the same month in 2013. That means there is still a lot of drive left in the housing construction boom.
