Data Vault – A weekly wrap up of key economic releases in Australia and beyond

July 23, 2011

Economic Data Vault

July 23rd 2011

Welcome to the first of our weekly Data Vaults. The Vault is put together by one of our team here at Lighthouse and edited by me – we offer it as a resource to readers and clients who want to quickly get a feel for the data over the week without having to read a full blog or economic report. It will be released each Saturday morning and while our primary focus is Australia we also include our key overseas indicators.

Australian Data

Australian Motor Vehicles sales

After two months of heavy falls, total motor vehicle sales stabilised somewhat in June, climbing by 1.3% or 1,023 to 77,424, from a month earlier. Sales of passenger vehicles drove the gains after the rose by 3.2% while sales of SUV’s were up 0.9% and sales of ‘other’ vehicles such as commercial vehicles fell by 3.1%.

 While the stabilisation in motor vehicle sales is somewhat a positive sign, breaking down the sales by state shows that passenger vehicle sale in Victoria accounted for all of the gain with the total number of sales over the month ex passenger vehicle sales in Victoria down by 0.2% or 148 vehicles.

 This was more than likely due to the replacement of cars written off earlier this year as a result of the extensive flooding experienced across the state as was seen with the pickup in sales in QLD a couple of months ago.

While supply disruptions in Japan had a noticeable impact on vehicle sales over the past month we wouldn’t expect sales to bounce back substantially over the coming months following the sharp drop in consumer confidence and growing uncertainties both at home and abroad resulting in households delaying major purchases until the outlook becomes a little clearer.

Westpac index of Leading Indicators

The Westpac index of leading indicators continues to point to slower growth ahead. While there were no further updates for the quarterly inputs the fall in the 2 of the months inputs which included the all ordinaries (-2.4%) and building approvals (-7.9%) more than offset gains in the money supply (0.6%) and US industrial production (0.1%) leaving the index down 0.1%.  The annual pace of the index has now slid to its lowest level since September 2009.

While this points to a weaker outlook for economic growth we were more concerned with the continued fall in the coincident index which has a much closer correlation with the actual GDP outcomes.  The fall in retail spending and the stagnant employment market provided the biggest drag on the coincident index which also fell 0.1% in May however the annual rate is now also sitting at -0.1%.

 If we assume that the correlation continues to hold then the relationship suggest that the annual pace of economic growth will slow from 1% in the first quarter to 0% in Q2. This implies that growth for the quarter will be 0.4% (absent any revision to previous outcomes) replacing the 1.4% increase from Q2 2010.

NAB Quarterly Business Survey

The NAB quarterly business survey, which is a much broader and more in depth survey than the monthly version, continued the trend of soft domestic data

The key take away is that like the leading index , the NAB business survey suggests we are in for an enduring period of weak aggregate demand. This weakness is aggregate demand is likely to be accompanied by an easing in inflationary pressure. Supporting this is the fact that the employment index continues to trend lower but more importantly the employment index has a strong correlation with employment costs as this chart shows.

Import and Export Prices – Australia

Australian export prices rose by 6% in the second quarter taking the annual increase to 10.5% while export prices remained subdued and are down 1% from a year ago after rising 0.8% in the quarter. Commodities price increase were largely behind the rise in both export and import prices. Driving export prices higher was solid increases in coal, iron ore and cotton while the increase in import prices was driven by petrol and gold. 

Offshore Data

US NAHB Sentiment Index

The National Association of Home Builders sentiment rose more than expected from 13 to 15 in July however sentiment still remains very weak by historical standards. It remains well below the average since 1985 of 49 and even further below the average from 1985 up until house price stop rising in 2006 of 56. There is also very few signs that we will see a sustainable improvement in sentiment, or the broader housing market, with Present sales, Future Sales and Traffic of prospective buyers all depressed by historical standards.

With the housing market one of the corner stones of the US economy it is hard to see a sustainable recovery until we see a pickup in the housing sector.

US Housing starts and building permits

Housing starts and building permits both beat expectations with housing starts climbing 14.6% to an annualised pace of 629k while building permits were up 2.5% to 625k after they were expected to fall. However similar to the NAHB housing market index, both housing starts and building permits remain weak by historical standards and are near record lows.

US Existing Home Sales

Existing home sales bucked the trend of better than expected housing data from earlier in the week, unexpectedly falling in June. Sales fell 0.8% to an annual pace of 4.77m. The market was expecting a gain of 1.9% however the pending home sales index suggested a weaker outcome.

European ZEW centre for economic research Economic Sentiment Indices

The Centre for European Economic Research (ZEW) in Mannheim, Germany, released its latest economic sentiment indices which tracks expectations for growth. The Eurozone index as well as the German, French and Italian indices all fell to their lowest levels since the Global Financial Crisis started as the Sovereign Debt Crisis continues to weight on confidence and the outlook for the economies across Europe. Interestingly the Germany index fell the most and is now the lowest at -15.1 followed by Italy at -9.6 and France at -2.8. Meanwhile the Eurozone index is at -7.

 Japanese Trade Data

Japan’s recovery from the natural disasters earlier this year continued in June with exports climbing 5.4%, adding to the 2.2% gain in May. The Trade deficit also narrowed after imports only increase by 0.5% over the month. Export remain 2.7% below the same time last year while imports are currently up 11.6% over the year

 US Philadelphia Fed

The Philadelphia Fed manufacturing index jumped back into positive territory in July, indicating that activity was once again expanding. However new orders were only marginally positive at 0.1 while the average working week continued to fall as the number of employees rose.

 US Weekly Jobless Claims

Initial jobless claim remain sticky above 400k, rising to 418k in the week ending July 16 from 405k the week before. Continuing job claims also remain sticky around 3.7 million. The number of Americans on emergency and extended benefits continues to slide but it is not clear whether or not they are getting work or their benefits are expiring. The fact that unemployment remains elevated suggests that it is more than likely the latter.

US Federal Housing Financing Authority House Price Index

House prices rose 0.4% in May according to the FHFA house price index. It is the second increase in as many months suggesting that house prices may be forming a bottom however last month’s 0.8% increase was revised down to a 0.2% increase.  It is not the first time prices have appeared to bottom only to resume falling again so it is a little too early to tell if this is actually the bottom. The weakness continues to be in those areas which experience the strongest price gains during the bubble while those regions who were less effected continue to perform relatively well.

 US Conference Board Leading Index

The US leading index continued to stabilise in June, rising by 0.3%, with the annual rate edging back up to 6% after a significant slowdown from its post GFC high.

Yours in data – The Lighthouse Team.

greg@lighthousesecurities.com.au

www.twitter.com/gregorymckenna

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