The Reserve Bank may be tempted to delay its second rate cut after the May house price data showed another month of stabilising, but other data yesterday left the picture of the economy as confused it has been in recent months.
A cut is already locked in from today’s RBA board meeting while Governor Philip Lowe makes a major speech in Sydney tonight where he will explain the central bank’s decision and thinking behind it.
An 8.4% fall in job ads in May in the monthly ANZ job ads series, also released yesterday, should be ignored because of the widening gap between it and the job vacancy series from the Australian Bureau of Statistics.
And business indicators for the March quarter, released yesterday by The Australian Bureau of Statistics were a bit better than expected, meaning GDP growth might be a touch stronger in tomorrow’s national accounts.
While house prices eased in May across the capital cities, there were more signs that the big falls of late last year and early 2019 are fading.
CoreLogic on Monday reported dwelling values across capital cities eased a further 0.4% in May to be down 1.7% over the previous three months and by an annual 8.4%.
The 0.4% fall was the smallest monthly decline in a year and CoreLogic head of research Tim Lawless said while values fell in May there were signs of stabilisation.
“This improvement is primarily being driven by a slower rate of decline in Sydney and Melbourne where housing values were previously falling at the fastest rate of any capital city,” he said.
“Sydney values were 0.5% lower over the month while Melbourne values were 0.3% lower; the smallest decline in values across both cities since March last year. In other cities, where housing market conditions have generally been more resilient to a downturn, the trend is the opposite.”
Economists said if anything the election campaign and result probably canceled each other out. The change in the APRA rule on interest rates and today’s expected rate cut should help steady the still weak market.
Figures from the ANZ’s May job ads survey showed total job advertisements fell a seasonally adjusted 8.4% last month from April when they edged up 0.2%.
It was the biggest fall since January 2010 and job ads have now fallen in nine of the past 12 months.
The number of ads averaged 152,689 a week, 14.9% lower than in May last year.
Economists point out that the ANZ series does not cover ad on some websites such as linked in or on company intranets. Nor do they reflect actual vacancies, which the ABA series does. For those reasons, the survey is losing relevance.
Meanwhile, the business indicators for the March quarter released by the ABS yesterday showed wages, profits and sales rose in the three months, as did inventories.
Inventories rose 0.7% in the March quarter after a fall of 0.2% in the December quarter.
Headline company profits rose by 1.7 percent in the quarter. Converting profits to a GDP basis, profits were up 2.9% quarter on quarter, similar to last quarter 3.1% quarter on quarter, according to economists at the National Australia Bank.
Wages grew at a slightly faster rate of 1.1% (0.8% in the December quarter). Business sales, which are a proxy for production, rose by 0.5%, which was the largest increase since the first quarter of last year.
Overall growth could be closer to 0.5% to 0.6%. The current account data later today will make a positive contribution, but that could be offset by government finance data.