The economic picture looks a bit like this for the Reserve Bank tomorrow: inflation up last month, the price of existing houses growing more slowly in the March quarter, and jobs growth still kicking in, but slowing.
Slowing is the key, but if it hadn’t been for the rate rises in February and March, and the extra 0.40% to 0.45% increases from the banks, then the chances are we’d be facing a further increase later today.
But the much criticised rate rises are starting to have a greater impact on activity, with retail sales easing, building approvals lower and consumer confidence.
But the rise in house prices in the March quarter of 1.1% was the slowest rise in a year, but it wasn’t what the market had been expecting: a small increase of around 0.2%.
But the TD Securities/Melbourne Institute showed a rise of 0.5% in its version of the Consumer Price Index last month, thanks to higher oil and petrol prices, plus some increases in food costs.
That gave an annual rate of 4.3% in the year to April, not too far away from the 4.2% headline rate for the CPI(and around what the RBA’s own measures were showing)
The growth in the price of established houses did slow in the March quarter, but nowhere near as sharply as the market had been expecting.
According to Australian Bureau of Statistics figures, released yesterday estimates show the price index for established houses for the weighted average of the eight capital cities increased 1.1% in the March quarter 2008.
That compares to a revised upwards 4.1% in the December quarter (it was originally estimated at 3.2%).
Seeing the market estimate was for a rise of 0.2%, and some analysts were going for no increase, the news comes as a bit of a surprise, especially when the sharp upward revision in the December figure is taken into account.
That revision took the rise in the index in the year to March to boom-like 13.8%, unchanged from the 13.8% rate (revised up from 12.3%) in the December quarter, which will be some small comfort to nervous economists.
The news won’t force the Reserve Bank’s hand on interest rates at the monthly board meeting, but it does show that the slowdown is not pulling everything down at once.
Building approvals fell sharply in March, according to figures last week, and the retail trade estimates for the same month showed a 0.5% rise when released on Friday. That was more than expected but economists blamed that on higher food price inflation. Economists had been tipping around 0.2%.
Clearly there is a slowing, but not as quickly as the market had thought, so getting to zero will be a bit more drawn out.
According to the ABS the capital city indexes rose in Melbourne 4.1%, Brisbane 2.8%, Adelaide 2.1%, Canberra 1.0%, but fell in Sydney by 1.5%, Darwin 1.3%, Hobart 0.7% and Perth 0.6%.
The rise in Brisbane is of interest: building approvals have been falling there now for several months, and retail sales fell in March, from a high level in previous months. The other resource boom city, Perth, has seen the oomph vanish completely from its house price inflation.
The ABS said that in the year to March all capital city indexes rose: Melbourne surged 25.9%, Adelaide, 21.6%, Brisbane 20.8%, Canberra 14.4%, Hobart 8.2%, Sydney 7.1%, Darwin 4.9% and Perth 0.6%. Perth’s rise is a shadow of the 30%-plus figures we saw back in 2005-06.
Perhaps there’s a crunch coming this quarter as more rate rises bite from the banks and consumer confidence remains low.
The Reserve Bank won’t move rates; it will wait to see what the Rudd Government does in the Federal Budget tomorrow week.
Later this week we have international trade figures, employment for April and the Reserve Bank’s second Monetary Policy Statement for the year on Friday.
Meanwhile the TD Securities-Melbourne Institute monthly inflation gauge created an unwanted record in the year to April.
It showed headline inflation jumping by 4.3%, after rising by 0.5% in the month of April.
The 12 month figure was the highest year-end figure in the five-year history of the gauge.
The report said petrol prices climbed by 12.6% in the year to April while rents were up 12% in the same period.
The inflation gauge’s trimmed mean measure rose by 4.3% in the year to April, after climbing by 0.6%in the month. That’s a little faster than the RBA’s measure in the year to March, but not by much.
And car sales slowed compared to March, but rose compared to April last year because of the positioning of Easter in March this year.
The Federal Chamber of Automotive Industries (FCAI) said new car and truck sales in Australia last month rose by over 11%, compared to April last year.
With the Easter holiday in March this year, The chamber said 84,061 vehicles were retailed last month. But with April this year having three more trading days as a result, the FCAI said the daily sales rate fell 2.2%.
On a year-to-date basis, the car and truck market to the end of April was up 5.1% compared to the first four months of 2007.
But compared to March when sales hit just over 91,000 (Down on February’s 984,000 plus because of the earlier Easter) April sales eased by around 7%.
But the Chamber said private and business buyers were still active in April, compared to April 2007.
