Economic Releases

Some strong figures released yesterday show the Australian economy enters the second half of the year in good shape. There are some sensationalist headlines about rate hikes but the reality is that the RBA is still likely to wait until the CPI is released at the end of October before acting.

Retail trade: Up a much stronger than expected 0.7% in July. A big step up from the positive 0.4% in June that was originally reported as a 0.2% gain last month. There was also a 0.2% upward revision to May suggesting the retail sector has been stronger than thought for some months. Retail trade in July is already 1.1% above its average level in the June quarter. Even with some plausible pull-back in August; that’s still pointing to further growth in retail trade volumes overall in Q3.

Residential building approvals: Up a stronger-than-expected 2.3% in July, thanks to a continuing lift in private other (medium density) dwelling approvals that rose 7.7%, while private sector house approvals were virtually flat at -0.1%. The value of non-residential approvals was however relatively flat over the last few months.

House Prices: The RP-Data Rismark hedonic house price series rose 0.4% in seasonally adjusted terms in July, up 9.7% y/y, but that comes after an even larger 1.0% fall in June (+10.6% y/y). That was the first monthly fall since December 2008 to leave prices lower than where they were two months ago. The level of home prices in July remains below the recent May peak, by 0.6%. The trend cooling in house prices still looks to be continuing, but at a relatively measured pace.

Current account deficit Q2: Narrowed by a massive 11bn in just one QTR. It moved to $5.6bn in Q2 (1.7% of GDP) from $16.5bn in Q1 (5% of GDP), with the Balance on Goods and Services improving from a deficit of $3.2bn in Q1 to a surplus of $6.5bn in Q2. Export values rose 26% in Q2, with metal ores and minerals up 43% (volumes up 3% and prices up 39%), while coal and coke exports values rose 52% (volumes up 22% and prices up 25%). In contrast, import values rose just 5% .

Terms of trade: Up 12.5% in the June quarter; the fifth consecutive quarterly increase, with export prices up 14.2%, while import prices rose 1.6%

GDP Forecasts:

NAB -> Q2 GDP of 0.6%, (revised forecast from 1.0%) and 2.4% over the past year.

ANZ -> Q2 GDP of 0.9% and 2.7% YoY