A very mixed picture for the economy this morning, 24 hours away from a rate cut from the Reserve Bank.

In fact the picture painted was on the gloomy side: Job ads down sharply in October, house prices down in the September quarter across the country, manufacturing contracting as the credit freeze hit home (but nowhere near as damaging as in the US).

But inflation fell in October in a bit of good news, which would improve the odds of the RBA handing out a cut of half a per cent to go with the shock 1% cut last month and 0.25% in September.

Retail sales were again higher in the trend series for September released by the Australian Bureau of Statistics, but those figures are a bit rubbery at the moment. It’s certainly not the way homewares and electrical retailers, Harvey Norman and Clive Peeters, or clothing retailer, Non-B have been reporting their sales performance in recent weeks.

ANZ job series:

The gloomiest was the ANZ jobs ad series, which showed sharp falls in both newspaper and internet employment ads in the month. The bank said that the number of jobs advertised fell for the sixth consecutive month, tumbling 5.9% overall to an average of 231,135 per week. The bank said that was 9.8% lower than October 2007 and the biggest monthly drop since February 2001.

The ANZ said that the once booming resources states of WA and Queensland led the dive, with monthly decreases of 14.8% and 14.1%, respectively. Victoria saw an 11% and New South Wales, 11.9%. The ANZ’s head of Australian economics said in a statement that “The latest job advertisements data suggest the global financial crisis has had a substantial impact on the Australian economy.”

He predicted that hiring intentions will “continue to soften” until they trigger a slowdown in job growth and an unemployment rate of 6.5% by 2010. We will know more about October when the latest employment figures from the ABS are released on Thursday for October.

The ANZ said that internet job ads dropped 5.5% in October, the third consecutive fall in a row, but newspapers were again the disaster area, with a drop of 12.2% in October, to be down 35% over the year. The ABS said that the trend estimate of Australian retail turnover “increased by 0.2% in September 2008.” This follows a revised increase of 0.2% for each of the last four months.

In September 2008, four of the six industries had an increase in the trend. Food retailing (+0.6%) had the largest increase. Also increasing were Clothing and soft good retailing (+0.3%), Department stores and Cafes, restaurants and takeaway food services (both +0.2%). All States, except New South Wales (-0.3%) had an increase in the trend estimate.

The states with the largest increase in the trend estimate were the Northern Territory (+0.9%), South Australia and the Australian Capital Territory (both +0.6%). The trend estimate for the Australian retail series increased by 2.3% in September 2008 compared with September 2007.

More accurate, seasonally adjusted figures for the September quarter will be released on November 17. Like the jobs figures out on Thursday, the retail sales series has lost some accuracy because of budget cuts forced on the ABS by the Rudd Government.

Housing market:

Meanwhile the long awaited sagging in house prices has gone up a gear after appearing in the June quarter when the original estimate was for a fall of 0.3% from the March quarter. (That has now been cut to a fall of 0.2%). The ABS said this morning that the preliminary estimates for the September quarter have given a sharper 1.8% drop across the eight capital cities surveyed.

That produced an annual rise from the September 2007 quarter to the September quarter of this year of 2.8%, substantially lower than the upwardly revised 8.6% increase from June 2007 to the June quarter of this year.

The capital city indexes fell this quarter in Brisbane (-3.3%), Canberra (-2.5%), Melbourne (-1.9%), Sydney (-1.8%), Perth (-1.1%), and Adelaide (-0.1%), and rose in Hobart (+0.7%), and Darwin (+0.1%).

Over the year to September quarter 2008, preliminary estimates show that the price index for established houses for the weighted average of the eight capital cities rose 2.8%. Annually, house prices rose in Adelaide (+9.7%), Melbourne (+8.1%), Darwin (+6.4%), Brisbane (+5.6%), and Hobart (+2.4%), showed no change in Canberra (0.0%), and fell in Perth (-4.1%), and Sydney (-0.4%). The movement in the preliminary established house price index between June quarters 2007 and 2008 has been revised from an estimated increase of 8.2% to an increase of 8.6%.

Inflation:

Other figures out today revealed that inflation eased last month.

The monthly measure, the TD Securities-Melbourne Institute monthly inflation gauge, saw a fall of 0.2% in October, the first such fall since February. That followed a rise of 0.4% increase in September. The survey showed that in the year to October, inflation fell to an annual rate of 3.9%, the first time it has been below 4% since January of this year: the year to September rise had been a high 5%.

Manufacturing:

And the latest survey of manufacturing activity in Australia saw the a sharp fall in October as the impact of the credit freeze struck.

The Australian Industry (AI) Group-PricewaterhouseCoopers Australian performance of Manufacturing Index (PMI) fell 6.8 index points to 40.4 points in October. (anything under 50 is contractionary; above 50 is expansionary). The Australian Industry group said the October level was the lowest level in the series since it began in 1992 and the fifth consecutive monthly fall in activity.

GDP:

And UBS has cut its 2009 economic growth estimate to an annual figure for Gross Domestic product of a rise of just 1.5%; that’s down from the previous forecast of 2.3%.

UBS chief economist, Scott Haslem said the cut “in part reflects the base effects from a likely stronger finish to 2008 as we factor in the impact of the fiscal cash hand-out to consumers in Q408 & Q109, but also the early signs of a more rapid easing in investment growth on the back of weaker commodity prices, and softer export growth given now likely slower global growth.

“Indeed, for the 1H 2009, we now see near zero GDP on average, with Q209 likely negative (the first since Q400), with non-farm GDP slowing to 1% y/y, the slowest pace since the 1990-91 recession (ex the GST distortion in mid 2001).

“For 2010, we see growth rising to 2.6%, below trend and in line with the global recovery, as the consumer and housing sectors respond to a lower cash rate,” he wrote in a note to clients over the weekend.

Peter Fray

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