Businesses and investors should now be focussing more on the falling value of the Aussie dollar. Its now down more than 18 US cents from its peak, petrol prices are rising, despite the fall in world oil prices, and other costs are going to rise as well, just as we want inflation to start falling.
For companies like retailers who import a lot: this is bad news, but for mining and resource companies in particular, the sharp slump in the currency will offset the falling price of oil, copper and other metals, and shower even more money on the iron ore and coal exporters whose prices rose this year.
Housing finance in July was flat to poor, the new retail sales figures showed some sort of "trend" growth of a marginal 0.1% and business conditions and confidence seem to have steadied, but at low levels, without much optimism though.
The Australian Bureau of Statistics said that in seasonally adjusted terms, the total value of dwelling finance commitments in July (excluding alterations and additions) increased 0.6% with investment housing commitments up 2.3%, but owner occupied housing commitments down 0.1%.
In fact that increase in value was a bit misleading: the housing sector remains moribund with no growth at all in the number of commitments to build or to buy a new house, while there was a 0.1% improvement in the number of people who bought an established house.
That growth in the value of dwelling finance commitments was so small as to be inconsequential, especially with owner occupied housing lower and demand for new housing down as well.
In fact the number of loans granted to build or buy homes and apartments fell 0.2% from June, when they dropped a revised 3.7%. It was the sixth monthly fall in a row and a sign there's no life in the domestic economy.
The retail sales trend for July showed a small rise of 0.1%, but there was no seasonal adjustment because of the changes forced on the ABS by the $20 million cut in the ABS's budget by the Rudd Government's 2% "efficiency dividend" as part of the budget.
The ABS recast the previous three months figures in terms of the new method of sampling and found the trend was an unchanged 0.1% rise in each of those months. The seasonally adjusted figures will now be published each quarter and effectively we have gone backwards in the collection of up to date and accurate information from retailing in this country.
The small rise came after retail sales were flat in June, as shown under the old, more comprehensive method of collecting data. Meanwhile the latest National Australia Bank report on business conditions showed little change in the latest monthly report for August.
The NAB said the key message from the Business Survey was "that there has been little improvement in fundamental business conditions and confidence in August".
But while that might be viewed as gloomy, the NAB said that "It is somewhat reassuring that the Survey has shown some stabilisation in conditions at recent lower levels – and, in particular, that the rapid deceleration in the growth rate evident in recent surveys has, at least temporarily, paused. "That said, it bears repeating that the Survey readings imply another significant step down from the growth rates reported in last week's National Accounts.
"There is also evidence in the Survey that business has locked in these lower expectations for the near term. Business expectations for the December quarter are that there will be little improvement in business conditions over the next 3 months.
"In the last 6 months, business has continually under-estimated the speed of the slowdown and clearly some stabilisation in outcomes is necessary if business is not to continue to experience unpleasant downside surprises."
"Business conditions for the non-farm business sector as a whole rebounded slightly in August to partly offset the deterioration in July. "In seasonally adjusted terms, NAB's Business Conditions Index rose by 2 points to -3 index points in August, compared to 7 in May and a recent peak of 20 in October 2007.
"Put another way, on balance, firms view conditions as poor – with 23% of firms experiencing poor/very poor conditions and about 20% report good/very good, while conditions are satisfactory for around 55%. Notably, actual conditions are relatively much weaker than expectations for September quarter but consistent with preliminary views for the December quarter
"Both sales and profits remained poor in August, while firms reported stable employment after shedding jobs in July. "In August, sales/trading conditions edged up a point to -3 index points in August (compared to 12 in May) & profits fell by 3 points to -6 (cf 5 in May), while employment rose 5 to nil (cf 5 in May) (see chart opposite). Directly, firms report that less negativity in customer confidence/demand helped to stabilize sales, despite continued tight financial conditions (mainly interest rates).
"Based on historical relationships, overall business conditions appear consistent with annual growth in non-farm GDP of about 2% or less.
"That points to a significant slowing in economic activity during the past couple of quarters, and compares with the Statistician's latest quarterly reading of 2½% during the year to the June quarter 2008. "Put another way, non-farm output growth has at least halved from the recent peak in mid 2007."
That's what the Reserve Bank has been wanting, what showed up in the national accounts last week and what RBA Governor, Glenn Stevens described Monday in his appearance before the House of Representatives Economic Committee.
Looking at the states, the NAB said: "Over recent months, business conditions have deteriorated further in all states and industries (especially in NSW & somewhat surprisingly, in mining & WA), albeit some differences continue to persist across sectors & regions. "By industry, there has been a marked deterioration (to varying degrees) in the trend conditions reported by most industries (including very recently mining) since late 2007.
"Mining conditions surprisingly have deteriorated rapidly of late, but still remain satisfactory/ positive and rebounded somewhat in August. "These recent falls may prove temporary due to the production disruptions relating to the availability of gas in WA.
"Tighter financial conditions and weakening demand have weighed heavily on retailing & personal services sectors, and more recently, manufacturing and wholesaling, with all these sectors now reporting 'negative' or poor conditions – that is, more firms currently reporting poor than good conditions.
"The decline in retailing has been particularly noticeable in recent months, notwithstanding some stabilization in August. Together with the broader financial turbulence, financial, business & property services have continued to weaken.
"By State, there has been a general deterioration in business conditions during the first part of 2008. "South Australia has unwound some of the recent gains in April and May, but remains above the average for Australia as a whole.
"Western Australia remains the strongest state despite declining significantly over the past few months. "Victorian conditions also eased further in August to still be performing better than the national average.
"On the other hand, NSW recorded a further deterioration to record negative conditions in August and continue to be the weakest performing state. "Queensland also declined to remain around the national average."
