A mixed economic report card yesterday locally with a series of data releases painting conflicting pictures of activity and demand.
Business confidence and conditions jumped to a nine month high in May, according to the latest National Australia Bank survey, but growth in new job ads slowed in the same month, the ANZ job ads survey slowed sharply, but housing finance showed a strong rise, instead of the forecast fall from market economists.
The cluster of news releases around 11.30 am saw the dollar jump half a cent, then ease back after midday, to trade around 77 US cents.
The news also helped push the stockmarket higher after an early fall, but that gain also vanished as trading went on and the market finished easier.
It is clear from yesterday’s figures that the two rate cuts by the Reserve Bank in February and last month, are starting to have a positive impact on business confidence, conditions and housing – but not job advertising.
The ANZ job ads report was static in May with the average number of job ads each week in the month of 144,767 barely changed from April’s total, which in turn saw a rise of 2.5% from the March figure.
That left the growth in job ads in the year to May up 14.1% on a seasonally-adjusted basis, but the pace of that growth is slowing.
New internet jobs slowed to an increase of just 0.1% in May, but newspaper ads slid 4.3% as the print media’s increasing irrelevance to employers becomes more apparent.
“Although consumer confidence in economic conditions has improved on the back of the Commonwealth budget, it remains below long-term average levels, weighed down by elevated unemployment and a soft labour market,” ANZ chief economist Warren Hogan said in yesterday’s statement accompanying the report.
"Businesses also remain cautious, with soft growth in consumer demand and spare capacity impacting on confidence, hiring intentions and investment plans," he said.
The slowdown in job ads points to a possible weaker than expected jobs report from the Bureau of Statistics tomorrow.
The job ads report has some correlation with the ABS data which revealed a mixed report on the health of the labour market in its April report, released a month ago. These figures bounce around a bit month by month, so it is also possible the ABS data could show a surprisingly stronger than forecast outcome.
But there is no equivocating about the April housing finance figures – they were much better than forecast – like the April building approvals figures released last week.
Home loan approvals rose 1% in April, after market economists had tipped a 2% drop.
The ABS’ seasonally adjusted figures show the value of total housing finance rose 2.9% in the month to $32.71 billion, with investor housing loans up 2.6% and owner-occupied housing up a much stronger than forecast 3.1%.
Loans to build new houses rose by 4.3% in April from March, while approvals to buy newly built homes were up 1.6%. Lending for established residential property rose by 0.5%.
It’s clear from these figures and the building approvals data last week that the housing sector – both new and used homes – remains very strong, especially investor housing which has yet to show the much hoped for signs of easing.
And it was the third month in a row that the number of home loans has risen.
And the nine month high for business confidence and the improvement in business conditions was good news, but there were still some questions, according to NAB chief economist Alan Oster.
He said the employment component was still negative (a “meaningful recovery in employment remains distant” the report said yesterday) and the rebound in conditions wasn’t uniform.
“With future domestic demand still weak, unemployment is expected to rise a touch to around 6.4 per cent by the end of 2015 and remain relatively high for some time,” Mr Oster said. The budget and the RBA say the jobless rate will rise to 6.5%.
The business confidence index for May rose 4 points to 7, the highest since October, while the business conditions index, which looks at current conditions rather than the outlook, rose 3 points to 7, which was also the highest reading since October
The NAB commented: “there is a growing difference between more optimistic short-term data and weaker longer-run expectations”.
"But while some of the partials have improved on the back of a further rate cut and a well received Budget (for business), weakening longer-run capex expectations in the non-mining sector are still a concern. Businesses are still reluctant to employ and consumers remain cautious,” the bank said in yesterday’s commentary.
