Three sets of figures out today indicate a deepening slowdown in the Australian economy. Import figures and lending finance numbers issued by the Australian Bureau of Statistics showed definite signs of receding demand, while the TD Securities inflation gauge showed a sharp fall in inflation last month to a three year low. All are the type of indicators that suggest the economy is slowing, although inflation is still being dragged lower by weakening oil and petrol prices. While the publicity savvy Access Economics got plenty of publicity this morning for a rather noisy (and well-briefed) recession prediction, the latest figures put some meat on their assertions. The ABS figures for lending finance for November showed distinct signs of the slowdown with total personal finance commitments down 1.8% in November, to $6.095 billion, from October. The driver was a 10.4% slump in commercial finance, seasonally adjusted, to $28.375 billion, from $31.669 billion in October.  Lease finance fell 3.0% in November to $518 million, compared with $535 million in October as financiers exited the market or cut back their lending. Housing finance for owner occupation rose 1.4% to $12.460 billion in November from $12.290 billion in October, as suggested in last week’s housing loan approval numbers. The ABS said that import figures for December fell $432 million or 2% in seasonally adjusted terms in December from November. In original terms the fall was 4% and the raw total of $20.13 billion was the lowest since August as oil and petrol prices continued to fall, despite the drop in the value of the Australian dollar. And the TD Securities/Melbourne Institute inflation gauge showed another sharp fall, driven lower by the fall in petrol and oil costs as well. The gauge suggests consumer price inflation fell to its lowest level since 2005 in December. The inflation gauge fell 0.2% in December, on top of a 0.6% drop the month before and October’s 0.2% fall. TD Securities said this was the first time in the history of the series that the gauge had fallen for three consecutive months. It said annual inflation slowed to 2.2%, from 3.0% in November, the lowest since May 2005 and a long way from June’s peak of 4.8%. The Consumer Price Index for the December quarter and 2008 will be released by the ABS next week. And on Friday week we get the latest view on the economy from the Reserve Bank when the first Monetary Policy Statement of the year is released. — Glenn Dyer Storm Financial refuses to die. Storm founder Emmanuel Cassimatis is seeking a financial adviser’s licence even as his empire crumbles. ASIC searches reveal that Ignite, a company associated with Storm Financial’s Emmanuel Cassimatis, has applied for a financial adviser’s licence with the regulator. The approval is ”pending”. Ignite is owned by Emmanuel and Julie Cassimatis and earned royalties from Storm for providing software services. The Ignite application was made in late November last year, just before Commonwealth Bank began contacting Storm clients to advise them of margin calls against their positions and selling down its Storm-branded funds. (Challenger had begun selling in October). — BusinessDay

UK readies fresh bank bail-out plan. Britain’s beleaguered banks were on Sunday night preparing to accept a new bail-out as government officials put the finishing touches to a plan designed to end uncertainty about future losses and stimulate the flow of credit to consumers and companies. Alistair Darling, chancellor of the exchequer, spoke to senior executives of Britain’s largest banks to outline the plan, which will see the government insure banks against potential losses on risky loans in return for firm commitments to increase lending to credit-starved consumers and businesses. Amid fears about a public backlash against billions more of taxpayers’ money being committed to help the financial sector, ministers are expected to express their anger and frustration at the banks’ reluctance to increase lending despite benefiting from the government’s £400bn bail-out in October. — Financial Times

Germany about to enter worst recession since WWII. The German economy is about to suffer its deepest recession since World War II according to economics Minister Michael Glos speaking in an interview with the German newspaper Welt am Sonntag. Glos said growth in Europe’s largest economy is now expected to drop by as much as 2.5 percent this year (and there is still downside risk here). Earlier government estimates had been for slight positive growth (0.2 percent). This suggests that the miracle export-driven-recovery in German economic performance that so many were enthusing about in 2007 has actually been a short lived, one-off, affair, driven largely by an unsustainable lending boom in the UK, and Southern and Eastern Europe. — A Fistful of Euros

More on the big bad bank. OK, I’ve been doing more homework on the “bad” or “aggregator” bank idea that seems to be gaining ground. And here’s what I think: it’s mainly based on a false analogy. What people are thinking about, it’s pretty clear, is the Resolution Trust Corporation, which cleaned up the savings and loan mess. What’s being contemplated now, if Sheila Bair’s interview is any indication, is the creation of an RTC-like entity without the rest of the process. The “bad bank” will pay “fair value”, whatever that is, for the assets. But how does that help the situation? – Paul Krugman, New York Times

The Bush economy assessed. President Bush is leaving office amid the worst recession in 25 years, and naturally his economic policies are getting the blame. But before we move on to the era of Obamanomics, it’s important to understand what really happened during the Bush years — not least so we don’t repeat the same mistakes. Mr. Bush has tried to explain events with one of his populist aphorisms: “Wall Street got drunk and we got a hangover.” The remark is ruefully amusing and has an element of truth. But it also reveals how little the President comprehends about the source of his Administration’s economic undoing. To extend his metaphor, Who does Mr. Bush think was serving the liquor? — Wall Street Journal

Peter Fray

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