The Reserve Bank would not have found anything to ‘scare the horses’ in yesterday’s start of the month economic data ahead of its first monetary policy meeting for the year that left interest rates unchanged (see separate story).
Yes, house prices rose – 1.1% – a bit faster than the 0.8% forecast, and home lending hit an all-time high of more than $32 billion in December, while retail sales fell that month – down 4.4% with rise of omicron the culprit – all that was not unexpected.
And manufacturing was also hit by Covid with the monthly survey of activity revealing a sharp dip back into contraction as demand eased over summer.
But none of the negatives look terminal for the economy and they support the details in the January business survey from the NAB that showed big falls in business conditions and confidence in January.
The Australian Bureau of Statistics (ABS) retail sales report confirmed anecdotal reports of the slowing in the pace of activity in the run up and just after Christmas thanks to the widening reach of Covid and growing supply problems (which worsened in January).
The ABS said retail sales fell 4.4% in the last month of 2021, the biggest monthly fall since April 2020.
ABS director of quarterly economy wide statistics Ben James said retail sales remained above pre-pandemic levels, with December’s turnover the second highest level on record behind November.
The ABS noted softer trading conditions emerged later in December as consumers became more cautious due to rising omicron cases, but the overall spending for the month was still strong.
“Despite this month’s fall, retail turnover remains strong, up 4.8 per cent on December 2020, with strong consumer spending continuing post the Delta Outbreak,” Mr James said.
“Victoria recorded the largest fall of any state or territory, down 8.4 per cent, however this only partly unwinds the state’s strong rise in November when it rose to a record level.”
But November saw Victoria’s retail sales jump 20% as the state emerged from lockdown.
November also included the annual Black Friday sales event.
NSW spending fell 4.2% in December and Western Australia dropped 3.5% while the Northern Territory was the only state or territory to record a rise in turnover, with easing restrictions contributing to a 3.6% rise.
Meanwhile, lending figures from the ABS also released on Tuesday show the value of loans issued for housing increased by 4.4% in December to be up by 26.5% over the past year.
They reached a record $32.8 billion in the month.
Loans to owner-occupiers lifted by 5.3% to be just short of the record set last May. Loans to investors grew by 2.4% to reach an all-time high of $10.3 billion in the month.
Investor loans were up nearly 74% over 2021 but first home buyers rose 1.3% in December for the second consecutive monthly increase.
Meanwhile national house and apartment values rose 1.1% in January to be up 22.4% over the year, the highest annual growth rate since 1989 (which was on the eve of the great price crunch of the early 90’s).
CoreLogic data show a small continuation of the slowing trend from late 2021 and the group’s research director Tim Lawless said the next few months would help determine if the trend of rising prices is here to stay given the start of the year typically has fewer sales.
“The early indication is that housing markets are starting 2022 with a similar trend to what we saw through late last year. Values are still broadly rising, but nowhere near as fast as they were in early 2021,” Mr Lawless said on Tuesday.
“A softening in growth conditions has been influenced by less government stimulus, worsening affordability, rising fixed term mortgage rates and, more recently, a slight tightening in credit conditions, and a surge in new listings through the final quarter of last year.”
And finally, the monthly survey of Australian manufacturing activity fell by 6.4 points to 48.4 points over the summer holiday period, indicating weaker conditions compared with November 2021.
The market was expecting to see a reading of about 53 points for January, so the result was a surprise.
But given the onset of Omicron in December and into January, the fall is not that surprising.
