Friday, April 10, 2009

More Australian economic statistics - home finance, retail sales and employment data

On 8 April the Australian Bureau of Statistics released estimates of Australian housing finance for February 2009. The value of dwelling commitments rose by 1.7% in trend terms, 1.3% seasonally adjusted.

There was a fall in finance for investment properties, but this was more than offset by a solid rise in finance for owner occupied housing.

The influence of the first home buyers grant was clearly evident in the numbers. In original terms, the number of first home buyer commitments as a percentage of total owner occupied housing finance commitments increased from 26.5% in January 2009 to 26.9% in February 2009, the highest proportion since the series commenced in 1991.

This fits with what I said in On-ground effects of the Australian Government's stimulation packages - March 2009, referring to the mini-boom in house prices at the lower end of the market.

Value of dwelling committments Feb 09 An important feature of the statistics was a solid increase in the number of loans for both new construction and the purchase of newly constructed homes.

The graph from ABS shows the value of new dwelling commitments. The significant decline as the economy turned down in the first part of 2008 has been replaced by a clear upward trend.

This trend is likely to continue until the end of June when the extra home buyers grant comes to an end.

I did not comment on the February retail sales figures. These were released on 1 April and showed a drop of 2% in seasonally adjusted terms. This was to be expected after the big increase flowing from the stimulus package cash payments.

The ABS release included a fascinating graph that drew this out in a rather dramatic way.

The graph on the right shows retail sales. You can clearly see the big increase in December, with the effect then tailing away.

There is still debate in Australia about the value of the stimulus package because so much went into savings. To my mind, that is no bad thing.Retail turnover February 09

Cheques from the next stimulus package are now in the mail, so to speak, with payments appearing in people's bank accounts. I don't expect this to have the same impact, in part because of the constant gloom reporting.

During the week the Australian Reserve Bank reduced the cash rate by a further 25 basis points to 3%. I had hoped that they would not.

Just at present reductions in official rates are not very effective because of a widening gap between the official rates and the banks' cost of funds, so official rate cuts are not necessarily passed on. Further, to my mind there is a strong case for greater stability in policy making. Governments including the Australian Government are a bit all over the place, driven by the latest data.

Finally on the statistics' front, the latest Australian employment statistics were released yesterday. As might have been expected, they showed some deterioration in employment conditions, with the unemployment rate in seasonally adjusted terms increasing from 5.2 to 5.7%. The participation rate remained the same, with a small increase in part time work more than offset by a fall in full time employment. 

I don't pay much attention to the monthly work force statistics because they are a lagging indicator. Certainly we still have some distance to go before we reach the levels set by the 1991 recession when unemployment peaked at over 10%.       

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