An optimistic economic outlook

Widely respected business and financial commentator, Peter Switzer, has conducted his monthly economy check with some good results recorded.

 

Mr. Switizer predicts that the official cash rate will see a rise in mid 2018 based on; how quickly the economy can achieve 3% growth, inflation to be above 2%, and wages starting to rise. Other leading economists are banking on a 2019 rise.

 

Unemployment has fallen to 5.6%, compared to 6.3% in 2015. Full time jobs have grown by 115,400 positions in the last two months, which is the strongest back-to-back gain in 29 years.

  

Capital city home prices grew by 1.5% and is up 10.5% for the year as per the CoreLogic Home Value Index.

 

The Commonwealth Bank Manufacturing Purchasing Managers’ Indexshows expansion has slowed but still growing as the reading remains over 50.  The rate reduced by 1.8 points to 54.4 in July.

 

The weekly ANZ/Roy Morgan consumer confidence rating grew by 3.3 points (2.9%) to a 5-month high of 118.4 in the week to July 30.  A 4-year high was observed in the respondents’ views to economic conditions over the next 12 months.

 

After a 0.4% rise in May, private sector credit rose by 0.6% in June. After recent 3-year lows, annual credit growth was up from 5% to 5.4%. This is on the back of regulators trying to reduce interest-only lending.

 

Loans for renovationshit 7-year highs but personal loans attained a 14½-year low in May, while annual lending to purchase land hit record highs.

 

Business credit grew by 0.9% in June to be 4.4% higher than a year ago. A positive sign for business investment which has been struggling of late.

  

Approvals by local councils to build new homes jumped by 10.9% in June, after falling by 5.4% in May. Another sign that housing construction is not in free fall as some have previously indicated, is, house approvals grew to 13-month highs, up 4%.

 

Credit and debit card purchases were up 16.3% on the year to 706 million purchases (just exceeding December 2016 Christmas sale figures). The purchases were up 11% over the year to almost $51 billion.

  

Retail sales were at 3.8% over the year after a 0.3% increase in June. Non-food retail sales have grown the past three months by 2.4%, and are up 3.8% on a year ago.

 

New motor vehicle purchasers grew 1.6% on a year ago to 92,754; a record for the July month. This sector of retail has been performing well (on and off) for the last few years.

 

The biggest trade surplus in five years has been recorded, growing from $8.9 billion to $12.7 billion. This shows the export sector is contributing to economic growth, although the high Australian dollar is causing some problems.

 

Record highs were recorded in the export prices for meat and meat products; rising by 7.2% in the quarter.

 

Over the year to May, air travel along the Sydney to Melbourne route hit a record high of 83.8% with 8.94 million passengers.

 

For the June quarter, the Chinese economy grew at 6.9% the annual pace, well above forecasts.

 

Tourists from Greater China to Australia were up 11.3% over the past year, with a total of 1,519,100 visitors. In the same period, tourists from the United States of America were up by 15.7% to 750,200 visitors.

 

In June, the NAB business conditions indexrose from +10.9 points to a 9½-year high of +15.1 points. The business confidence index grew from +7.5 points to +9.3 points (the long term average for this figure is +5.8).

 

The current negatives for the economy is the slow growth in wage rises and the increasing Australian dollar. If the US economy continues to produce good numbers in employment and jobs growth, the US dollar will strengthen and the Australian dollar will consequently fall. 

 

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