The Australian economy has started the 2010-11 financial year on a more solid footing than many analysts and investors would have thought.
We already know that July employment data was solid and yesterday we discovered that retail sales rose faster than expected, while a jump in non-private dwelling approvals lifted building approvals into the positive, much to the surprise of analysts.
The only slightly negative point was another fairly weak month of credit growth, with business lending again surprising with bigger than expected drop.
The news saw the usual list of suspects among analysts and economists come out with ‘rate rise looms’ forecasts (one actually said two before the end of the year).
It doesn’t take much to get them excitable.
The retail sales figures more than offset any negativity from the lending data and were strong, as was the revision for June.
The Australian Bureau of Statistics said retail sales rose 0.7% in July, seasonally adjusted, following a revised upwards 0.4% increase in June (0.2% originally reported).
Analysts had tipped a 0.4% increase for July.
The revision to June turns that month into a not so bad month and makes a mockery of some of the gloom from some parts of the retailing sector.
The ABS said cafes, restaurants and takeaway food services led the way with a very sharp 5.3% jump in July, with other retailing showing a rise of 1.4%, food retailing 0.4% and clothing, footwear and personal accessory retailing edged up 0.2%.
Sectors where sales were weak included household goods retailing, down 1.7% after a strong result in June and department stores saw a fall of 0.7% in sales.
The ABS said Victoria (up 1.7%), Queensland (up 1.5%) and New South Wales (up 0.6%) experienced biggest seasonally adjusted increases in July, followed by South Australia (0.3%) and the Northern Territory (0.2%).
Sales in Western Australia fell 1.8%, the Australian Capital Territory 0.7% and Tasmania 0.3%.
Interestingly, with the federal election being called in July there was no obvious impact on retail sales.
We will have to wait until this time next month for August figures to see if the confidence continued through all of the campaign.
And while there was a 2.3% rise in building approvals in July, there was also another fall in private housing approvals.
The rise was driven by better than expected approvals for non-private dwelling.
July’s rise followed June’s 3.3% fall.
It was the first rise in four months.
The ABS said that big rises in approvals in three states produced the rise.
According to the ABS, New South Wales (up 9.7%), Victoria (up 12.1%), South Australia (up 8.3%) and Tasmania (up 4.4%) recorded more dwelling approvals this month, while Queensland (down 18.3%) and Western Australia (down 4.9%) saw falls in seasonally adjusted terms.
Private sector houses approvals fell 5.3% in NSW and 14.4% in Western Australia. Victoria (up 6.9%), Queensland (up 3.2%) and South Australia (up 4.8%) all rose.
The value of total building approved fell 1.3% in July in seasonally adjusted terms.
The value of total residential building rose by 6.6% while non-residential building fell by 15.8%.
Non private dwellings could very easily fall this month and drag the building approvals figure for August back into the red, as it has done repeatedly in the past several years.
And the Reserve Bank reported that private lending rose 0.1% in July over June after a 0.2% rise in June from May.
Over the year to July, total credit rose by 2.8%.
Housing credit increased by 0.5% last month, following an increase of 0.4% in June.
Over the year to July, housing credit rose by 8.1%.
Other personal credit was flat in July, following a fall of 0.3% in June. Over the year to July, other personal credit increased by 3.2%.
Business credit fell by 0.4% in July, following a fall of 0.1% in June.
Over the year to July, business credit declined by 5.0%.
