A mixed picture from economic data yesterday released ahead of the Reserve Bank’s interest rate decision later today and tomorrow’s June quarter GDP figures.
Retail spending growth stalled in July, job ads growth slowed, but wages and salaries and company profits, plus business inventories were a touch firmer than forecast and could see GDP grow faster than the annual 2.8% rate forecast by economists.
The lack of any movement in retail sales in July seasonally adjusted (but up 0.3% on a trend basis) was an unexpectedly weak outcome that economists think could suggest consumers may have become less willing to spend as houses prices continue to fall (as they did in August) and wages remain weak.
Market forecasts were for a 0.3% gain but turnover was flat in July against an 0.4% gain in June, the July seasonally adjusted data released by the Australian Bureau of Statistics showed.
Still they were up a solid 2.9% year on year.
AMP Chief Economist, Dr Shane Oliver wrote that “After three consecutive months of solid gains through the June quarter it looks like retail sales are reverting to softness again.
“While strong jobs growth is supportive of consumer spending it is starting to slow and in the meantime weak wages growth and falling home prices are a drag and so we expect retail sales growth to be subdued going forward much like it was in the 2010-13 period.
”While food, other retailing and cafes were solid in August, household goods, clothing and department stores were weak,” he said in a note yesterday.
House prices were again weaker in August, falling for the 11th month in a row.
Falls in Melbourne accelerated while Sydney remained weak, data from CoreLogic’s index of home prices revealed. Nationally prices dropped 0.3% in August, leading to an annual fall of 2%.
Values in the combined capital cities fell 0.4% in the month and 2.9% for the year but while prices outside the cities eased in August they were still up 1.6% over the year to August.
The slowdown has been greatest in Sydney where prices were down 5.6% in the year to August and prices in Melbourne are starting to catch up with an annual fall of 1.7% in the 12 months to last month.
Sydney and Melbourne comprise about 60% of Australia’s housing market by value and 40% by number so what happens in those markets influences the national figures markedly.
The weakness was concentrated in the premium sector of the housing market in Sydney and Melbourne, with less expensive property faring much better, according to Corelogic’s report.
Job ads are still growing, but the rate of growth is slowing and the ANZ reckons the rate of employment ads no longer suggests a future fall in the jobless rate.
Figures from the ANZ’s August survey showed total job advertisements dipped 0.6% in August, from July when they had risen by a solid 1.4%.
Ads have been running at about 177,000 to 178,000 a month since January and annual growth slowed to 5.1% in August.
“After a strong rise in January, ANZ job ads have followed a sawtooth pattern, in seasonally adjusted terms, leaving the level little different from the start of the year,” said ANZ’s head of Australian economics, David Plank said in a statement yesterday..
“The level of ANZ job ads is still consistent with further growth in employment “ but Mr Plank added that job ads are no longer pointing to a further decline in the unemployment rate, currently at 5.4%, seasonally adjusted.
And ahead of the June quarter national accounts tomorrow data from the Bureau of Statistics showed that company gross operating profits rose a solid 2% in the June quarter, to be up 11.4% from a year ago.
The estimated growth in wages and salaries was 1.2% for the quarter and 4.5% (The way wages are measured in this series is different to Wage Price Index) for the year.
And business inventories rose a seasonally adjusted 0.6% in the latest quarter, and were up 1.8% in the year to June.
The AMP’s Dr Shane Oliver commented that the business indicators “were generally a bit stronger than expected in the June quarter – with a solid 2% qoq rise in company profits, the wages bill rising by 1.2%qoq as strong growth in hours worked made up for weak wages growth (albeit growth in the wages bill is slowing down from last year) and a stronger than expected rise in inventories implying a smaller drag on growth than expected from this source.
“Against this sales volumes were soft at just 0.3%qoq. Overall this implies a bit of upside risk to our June quarter GDP forecast of 0.7%qoq/2.8%yoy,” he wrote yesterday.
Today sees the release of the June quarter current account data and the government finance data for the same period.
