Australia | May 31 2010
By Greg Peel
There was somewhat of a flood of Australian economic data released this morning, including first quarter numbers for balance of payments, corporate profits and inventories, along with April private sector credit and house prices.
The first quarter data shows Australia was “on-trend”, ANZ economists suggest, which ties in the RBA's conclusion, while lending in April showed an economy becoming softer. The stock market peaked in April on European crisis fears, among other things.
After rising 3.2% in the December quarter, corporate operating profits rose 3.9% in the March quarter with mining increasing by 9.2% as inventories were run down, manufacturing posting a solid 17% gain, and transport chiming in with 7%. In the latter sectors ANZ suspects cost-cutting was significant following profit declines which extended from December 2008 to September 2009. Mining, of course, was all about prices.
A 0.5% rise in inventories in the March quarter was disappointing, suggests ANZ, given high levels of business and consumer confidence.
The terms of trade rose by 4.2% in the March quarter (exports minus imports) thus leading to a $1.9bn reduction in the balance of payments to $16.6bn. These are dollar figures, so again no prizes for guessing that commodity price rises, especially in iron ore and coal, had something to do with it. The RBA's commodity price index rose 4% in the quarter.
Turning to the more recent April credit data, total private sector credit rose by a disappointing 0.2% in the month compared to market expectations for a 0.5% rise.
Business credit growth fell 0.4% to be down 1.2% annualised reflecting lingering caution as Australia slowly recovers from the GFC (and reflecting an ongoing lack of willingness by banks to lend to anyone small). Personal credit increased by only 0.2% for month to mark 3.1% annualised, and ANZ suggests weaker recent retail sales data support the softness. But the economists believe strong consumer confidence and falling unemployment will support household debt demand going forward.
Housing credit grew by 0.5% in April to 8.0% annualised, with both the owner-occupier and investor segments stronger. ANZ expects investors to now outpace owner-occupiers as stimulus fades into memory and recent RBA rate hikes do not, leading to a general moderation in housing sector credit ahead.
And the RP Data-Rismark house price index has shown the first signs of slowing with only a 0.2% increase in national median house prices in April to 11.9% annualised.
Nothing there to tempt the RBA to do anything but hold rates steady tomorrow.