Private Capital expenditure figures point to GDP figures for the March qtr next week showing a decline. If this happens it will satisfy the technical definition of a recession with two consecutive negative quarters. The drop in investment by companies was a record 8.9% for the first qtr of 09 which is the sharpest reversal in more than 12 years.
There are signs, it's reported, of even bigger cut backs to come with estimates investment could plummet by up to 20% or more next financial year. This drop in investment will continue to push unemployment up and and increase the risk of a deeper recession.
In the USA an interesting, although dour statistic is that about 12% of US homeowners are late on loan repayments or are in the foreclosure process. This illustrates that the housing crisis there is likely to persist for at least another year.
May 30, 2009
May 29, 2009
BHP's Kloppers Hesitant About Recovery
Last night the US Treasury yield curve moved to its steepest level on record with the spread between 10- and two-year note yields gapping to 275 basis points, beating a previous peak set in 2003. This is partly due to the extra bonds being issued and is an indication as to what is likely to occur here. Supply is only one factor though with fears of future inflation being a more powerful force.
Also last night US existing home sales rose by 2.9pct in April against expectations of a 2pct rise. The stock of unsold homes rose by 8.8pct to 3.97million - the highest reading since November. At the current sales pace it would take 10.2 months to clear the existing stock of homes on the market for sale, up from 9.6 months.
In Australia, BHP Billiton's chief executive, Marius Kloppers, is urging caution about signs of improvement in the global economy, warning that any recovery is likely to be slow and protracted.
"I wish I could say that 2008 was the end of it," Mr Kloppers said. "The best we can say in the medium term is that conditions remain uncertain," he told a Minerals Week function in Canberra.
For Mr Kloppers and the global mining industry, the key question is whether the increase in industrial production in China and - eventually - the developed world, is coming merely from factories restocking their goods, or if it reflects more resilient growth in demand.
"I just want to caution that the current buying levels in China are a combination of restocking and underlying demand," he said.
Figures in Australia released yesterday showed that construction work eased from record highs in the March quarter, with weaker private sector activity
offsetting a sharp lift in public sector work. Construction work done eased by 3.7 per cent. Order books eased further in the March quarter. Work yet to be done was down 4.4 per cent on a year ago.
Also last night US existing home sales rose by 2.9pct in April against expectations of a 2pct rise. The stock of unsold homes rose by 8.8pct to 3.97million - the highest reading since November. At the current sales pace it would take 10.2 months to clear the existing stock of homes on the market for sale, up from 9.6 months.
In Australia, BHP Billiton's chief executive, Marius Kloppers, is urging caution about signs of improvement in the global economy, warning that any recovery is likely to be slow and protracted.
"I wish I could say that 2008 was the end of it," Mr Kloppers said. "The best we can say in the medium term is that conditions remain uncertain," he told a Minerals Week function in Canberra.
For Mr Kloppers and the global mining industry, the key question is whether the increase in industrial production in China and - eventually - the developed world, is coming merely from factories restocking their goods, or if it reflects more resilient growth in demand.
"I just want to caution that the current buying levels in China are a combination of restocking and underlying demand," he said.
Figures in Australia released yesterday showed that construction work eased from record highs in the March quarter, with weaker private sector activity
offsetting a sharp lift in public sector work. Construction work done eased by 3.7 per cent. Order books eased further in the March quarter. Work yet to be done was down 4.4 per cent on a year ago.
May 27, 2009
Various Posts From Daily Rate Sheet - Summary
May 21
The consumer confidence that started to return in April could not be sustained. A gloomy budget deficit further dented confidence leading to a drop of 4% from the 13 months highs of April to 88.8 in May. Consumer sentiment has remained in recessionary territory for over a year now but lower interest rates, increased housing affordability and government stimulus should see some optimism slowly return. Job security will however remain the main factor dampening confidence.
May 22
Overnight S&P downgraded the credit outlook for the UK economy saying Britain's outlook was negative and no longer stable. This caused some jitters about whether the US could hold onto its AAA credit rating.
May 26
Overnight, the Japanese government raised its assessment of Japan's economy for the first time in three years, saying the pace of worsening activity is slowing as exports and industrial output are bottoming out.
Confidence in Germany seems to be returning with the second month of increases in a corporate sentiment barometer over there. Hope is for the Euro Zone to stabilise in the latter part of 09.
In Australia, a non-traditional indicator being airline activity has shown there are fewer empty seats on domestic airlines than a year ago.
May 27
Overnight US consumer confidence soared from 40.8 to 54.9 in May, the biggest jump in six years. Consumer confidence now stands at eight month highs. US house prices fell by 2.2pct in March to be down 18.7pct on a year ago. And the Richmond Fed manufacturing index rose from minus 9 to plus 4 in May. The index had been as low as minus 20 just two months ago.
In Australia another non-traditional indicator - mobile phone sales - is showing some strength. They hit record highs in the first four months of 2009. It looks like this is where Kevin's stimulus package has gone. The new owners will no doubt be hoping for another package to pay for the phone bills!
The consumer confidence that started to return in April could not be sustained. A gloomy budget deficit further dented confidence leading to a drop of 4% from the 13 months highs of April to 88.8 in May. Consumer sentiment has remained in recessionary territory for over a year now but lower interest rates, increased housing affordability and government stimulus should see some optimism slowly return. Job security will however remain the main factor dampening confidence.
May 22
Overnight S&P downgraded the credit outlook for the UK economy saying Britain's outlook was negative and no longer stable. This caused some jitters about whether the US could hold onto its AAA credit rating.
May 26
Overnight, the Japanese government raised its assessment of Japan's economy for the first time in three years, saying the pace of worsening activity is slowing as exports and industrial output are bottoming out.
Confidence in Germany seems to be returning with the second month of increases in a corporate sentiment barometer over there. Hope is for the Euro Zone to stabilise in the latter part of 09.
In Australia, a non-traditional indicator being airline activity has shown there are fewer empty seats on domestic airlines than a year ago.
May 27
Overnight US consumer confidence soared from 40.8 to 54.9 in May, the biggest jump in six years. Consumer confidence now stands at eight month highs. US house prices fell by 2.2pct in March to be down 18.7pct on a year ago. And the Richmond Fed manufacturing index rose from minus 9 to plus 4 in May. The index had been as low as minus 20 just two months ago.
In Australia another non-traditional indicator - mobile phone sales - is showing some strength. They hit record highs in the first four months of 2009. It looks like this is where Kevin's stimulus package has gone. The new owners will no doubt be hoping for another package to pay for the phone bills!
May 20, 2009
RBA Minutes
Yesterday the RBA released the minutes from it's May 5 meeting. The minutes tried to appear upbeat and implied a further pause and as such the market has priced in a reduced chance of further rate cuts for the moment. My take on it however is that with unemployment likely to increase over coming months and companies continuing to find it difficult to refinance maturing debt, one or two further cuts are still probable. Unemployment is the key indicator to watch at the moment though. In the past the RBA has continued easing as unemployment grew. Things are a little different now as they were more preemptive this time than in the past. We still have a long way to go though.
For a complete copy of the minutes go to http://www.rba.gov.au/MonetaryPolicy/RBABoardMinutes/2009/rba_board_min_05052009.html
Also yesterday, Glenn Stevens alluded in a speech to the strength of our economy and the benefit we will receive from China's returning growth. These factors worked to support the pause argument.
For a complete copy of the minutes go to http://www.rba.gov.au/MonetaryPolicy/RBABoardMinutes/2009/rba_board_min_05052009.html
Also yesterday, Glenn Stevens alluded in a speech to the strength of our economy and the benefit we will receive from China's returning growth. These factors worked to support the pause argument.
May 12, 2009
NAB Raises Cash Target From 2% to 2.5%
I always thought 2% was a little extreme and with a few green shoots coming through and a positive monthly business activity survey coming out yesterday it looks like NAB are thinking that way now too. Here are a few lines from their summary:
** Business confidence stabilises at higher levels “relative” to very depressed levels earlier this year.
** Business conditions improve significantly - driven by retail and transport as Government cash initiatives improve retail and associated activities. Finance also edges higher.
** Forward orders also improve as does capacity utilisation and employment.
** All of these measures, however, remain at low levels - with future expectations at record lows. Overall, Survey consistent with (possibly temporary) moderate growth in demand in early Q2 2009.
** Business confidence stabilises at higher levels “relative” to very depressed levels earlier this year.
** Business conditions improve significantly - driven by retail and transport as Government cash initiatives improve retail and associated activities. Finance also edges higher.
** Forward orders also improve as does capacity utilisation and employment.
** All of these measures, however, remain at low levels - with future expectations at record lows. Overall, Survey consistent with (possibly temporary) moderate growth in demand in early Q2 2009.
May 08, 2009
Green Shoots But Expect Frost
There were some pretty impressive employment figures yesterday. You may have been surprised to see that there were an extra 27,000 odd jobs created during in the middle of a recession in April. I know I was and so were a lot of economists. Unfortunately the employment figures can vary wildly and the trend is likely to be for a further increase in the number unemployed during 2009. The figures are based on a survey with a sample size of 0.24% of the population or 22,800 houses, flats etc.
While these figures, and the retail sales figures, may prompt the RBA to continue pausing their rate cuts for the moment, all business surveys and confidence indicators suggest that the easing cycle isn't finished yet.
While these figures, and the retail sales figures, may prompt the RBA to continue pausing their rate cuts for the moment, all business surveys and confidence indicators suggest that the easing cycle isn't finished yet.
May 07, 2009
Stimulus Package Impacting on Retail Spending
Retail spending painted a prettier picture yesterday and showed the stimulus package is having some impact. It was up 2.2% in Mch which is the second best result in nine years. With another stimulus package on the way, followed closely by whatever is in the budget, retail sales should remain buoyant over the next couple of months.
Other positive news came from our eighth consecutive trade surplus. It rose from $1.75 M to $2.5 M in March - the second highest on record. Exports remain 25% higher than a year ago - obviously helped by our lower dollar.
Other positive news came from our eighth consecutive trade surplus. It rose from $1.75 M to $2.5 M in March - the second highest on record. Exports remain 25% higher than a year ago - obviously helped by our lower dollar.
May 06, 2009
Positive Housing Numbers
In economics news there were some more positive housing numbers yesterday - this time from Australia. Building approvals were up 3.5% in Mch, following the 8% gain in Feb. This is the biggest back to back gain since Oct 2003. House approvals rose for the fourth straight month, lifting by 3.4% in Mch - this is the biggest increase in two years. Pretty positive even if it is off a low base. That should help get a bit of development application revenue into Council.
This is a good indication that some of the stimulus is hitting the housing sector. Combined with a tight rental market, low interest rates and soaring population growth this sector seems to be building a solid base.
Despite the RBA's rate pause yesterday we will continue to see the effects of this recession play out for sometime. Yesterday, for instance, figures showed SMEs are struggling with a 64% increase in bankruptcies in this sector. Unfortunately for them they haven't benefited from recent easings either.
This is a good indication that some of the stimulus is hitting the housing sector. Combined with a tight rental market, low interest rates and soaring population growth this sector seems to be building a solid base.
Despite the RBA's rate pause yesterday we will continue to see the effects of this recession play out for sometime. Yesterday, for instance, figures showed SMEs are struggling with a 64% increase in bankruptcies in this sector. Unfortunately for them they haven't benefited from recent easings either.
May 04, 2009
Easing This Week???
NAB and ANZ have recently released 1/2 year results. One key statistic to come out is that small to medium-sized enterprises are struggling. Loan defaults are occuring at a greater rate and sooner than either bank expected. The faultering of this sector will impair the economy's ability to bounce back from recession quickly. The effect of this will be that rates are kept lower for longer.
Job ads have halved in a year: According to the Oliver Job index online job ads have fallen 7.43% in April or just shy of 50% in a year.
The RBA Board meets this week. While I'm of the view that if they are going to ease later they might as well get it done now before things get worse, I don't think they will. The market concensus is certainly moving that way with only a 26% chance of a 25 point cut priced in. The justification for the brief pause is to A/ Confidence - give the impression things aren't as bad as they seem. People generally wait until the easing process has finished before getting active again, B/ Let current stimulus work its way through the system, and C/ see what the budget holds.
Job ads have halved in a year: According to the Oliver Job index online job ads have fallen 7.43% in April or just shy of 50% in a year.
The RBA Board meets this week. While I'm of the view that if they are going to ease later they might as well get it done now before things get worse, I don't think they will. The market concensus is certainly moving that way with only a 26% chance of a 25 point cut priced in. The justification for the brief pause is to A/ Confidence - give the impression things aren't as bad as they seem. People generally wait until the easing process has finished before getting active again, B/ Let current stimulus work its way through the system, and C/ see what the budget holds.
May 01, 2009
NAB Qtly Business Survey / Housing
Yesterday the NAB came out with the Qtly business survey. If you'd like to see a copy please email me at yield@curvesecurities.com.au. The first page summarises the statistics and their forecasts. As you would expect they don't paint a great picture. Business conditions fell for the fifth month in a row to levels similar to the early 90s recession. Business expectations for the next 12 months are at the lowest level since the survey began in 1988. Confidence has improved moderately but is still at 1990s levels.
More positive news came from home sales figures yesterday. New home sales rose by 4.2% in Mch hitting a 13 month high. New home sales have now jumped over 20% since Dec
More positive news came from home sales figures yesterday. New home sales rose by 4.2% in Mch hitting a 13 month high. New home sales have now jumped over 20% since Dec
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