Australian jobs as predicted: The Australian jobs market showed nothing that would cause the Reserve Bank to change its mind on the direction of interest rates.  And, as the bank has sent heavy signals that there are more rate rises to come to help control inflation in 2011 and 2012 as the resources boom gathers strength, then we will get more increases in the cash rate.  The unemployment rate was steady at 5.3% and 30,100 jobs were created, with that gross figure trimmed by the loss of 10,600 part-time positions, itself a natural development for a strengthening labour market.  That left a net gain of 19,600 jobs for the month, about what market forecasts had predicted.  It was the seventh consecutive month Australia has seen a rise in the number of full-time jobs.  The number of people unemployed increased in March, up 4200 people to 619,100, the ABS reported with a fall in the number of people looking for full-time work offset by a larger rise in the number of people looking for part-time work.

Growth US #1: (lack thereof) Many US retailers tonight (our time) will reveal store sales figures for March, and there’s lots of talk about how they could show gains of  up to 10%, leading to lots of joyful talk among analysts and others about how “the consumer is back”. These figures are becoming misleading, with the economy-wide retail sales figures always much smaller (and giant Wal-Mart no longer releases monthly figures). Car sales are included in US retail sales figures, which makes them hard to compare with sales growth in other economies.

Growth (US) #2: Certainly the Fed isn’t convinced. The minutes of the March meeting were not “dovish” as some commentators claimed, but a touch gloomy on the strength of the recovery. That was a message Fed chairman Ben Bernanke repeated overnight in a speech when he singled out the sluggish jobs market and property, which remains a very big concern: “We have yet to see evidence of a sustained recovery in the housing market. Mortgage delinquencies for subprime and prime loans continue to rise, as do foreclosures. The commercial real estate sector remains troubled, which is a concern for communities and for banks holding commercial real estate loans.”

Growth (US) #3: The retail surge expected won’t be sustainable, with consumer credit down again in February for the 11th month in the past 12. January’s big rise was actually larger than the first estimate, with the Fed’s first figure of $US5 billion, becoming a rise of $US10.6 billion in the figures issued overnight. So that made the $US11.5 billion fall in February even more dramatic. Consumer borrowings fell because of a fall in credit card and non-revolving loans. That’s easy to explain (but not yet understood by many US analysts). The number of credit cards on issue in the US is falling as lenders and consumers give them up. For example, the number of Visa, Mastercard, American Express and Discover cards fell by 32 million, or 11%, in 2009. And the total number of cards on issue in the US is now almost 20% lower than it was a couple of years. The amount of revolving credit in the US (credit cards and personal loans), has fallen $US100 billion since the fourth quarter of 2008. It’s now lower than it averaged in 2006. That’s the biggest fall recorded since the figures started in 1968.

Growth #1 China: Next week we could see Chinese first quarter GDP hit an annual rate of 11% or more, according to forecasts. That has  produced forecasts of a rate rise this quarter, and possibly some move to relax the peg that has fastened the yuan to the US dollar since midway through 2008. The value of the yuan is the big issue, not growth or inflation. The US and China are moving to some sort of deal on the Chinese currency with American treasury secretary Tim Geithner there now. Yesterday the People’s Bank of China set the trading range for the yuan at its highest level since the second quarter of last year, a move that drew the sort of attention the Chinese obviously wanted. Could we get a rate rise and a freeing up of the yuan, all in one go? The rate rise and a rise in the yuan would help cut inflation and both would add to the gentle tightening in monetary policy now under way.

Growth #2 Europe: The news on growth was gloomy. GDP was static in 16 eurozone countries in the fourth quarter of 2009, according to the newest reading from the European Statistics Office. That’s down on the first estimate of growth of 0.1%. A steeper fall in Italy and a fall in several components caused the downward revision. Italian growth shrank by 0.3% instead of 0.2% quarter on quarter; in Portugal growth contracted by 0.2% (steady in the first estimate), and growth in Holland rose 0.2%, instead of the early estimate of 0.3%. Greece’s economy shrank by an unchanged 0.8% and Ireland’s by 2.3% in the fourth quarter from the third quarter. In the wider 27 country European Union, growth rose 0.1%. Over the whole of 2009, GDP decreased by 4.1% in the euro area and by 4.2% in the EU27, compared with growth of 0.6% and 0.7% respectively for all of 2008. Over the whole of 2009, GDP decreased by 2.4% in the US (+0.4% in 2008) and by 5.2% in Japan (-1.2% in 2008).

Growth #3 The world: But that’s history, so what of 2010? Well, despite lots of talk about how buoyant conditions are in the major economies, a tentative estimate from the key rich country club, the Organisation for Economic Co-operation and Development (OECD), paints a different picture; a slowing in the March quarter for the G-7 economies (which doesn’t include China) and then a quickening in the June quarter. The OECD’s report forecast aggregate first-quarter growth of 1.9% in quarter-on-quarter, annualised, terms for the G7 group, rising to 2.3%. The forecasts are all lower than the 3.7% annual growth rate registered in the last quarter of 2009.

Growth #4: “Economic activity gathered steam in most of the major OECD economies in the last quarter of 2009 with the notable exception of the euro area,” the OECD said. “Taking the most recent data flow into account, the OECD short-term forecasting models suggest that growth is likely to slow in the first half of 2010.” Behind the G7 aggregate, the OECD’s forecasts showed the US growing by 2.4% in the first quarter and 2.3% in the second. That’s more than half the 5.6% annual rate seen in the final quarter of 2009. Japanese first quarter growth is forecast at 1.1%, down from the 3.9% rate in the last quarter of 2009. Germany is forecast to contract by 0.4% this quarter (zero in the December quarter of last year), and then rebound strongly to a 2.8% annual rate in the June quarter.

Growth #5 East Asia: The G7 growth rates are pallid compared to the 8.7% forecast for the East Asian and Pacific economies by the World Bank in its latest half yearly forecast, that’s 1% more than in the November forecast and above the 8.5% recorded in 2008 and 7% in 2009. The growth is due to China (without China, growth in the region last year was just 1.3%). The World Bank sees Chinese growth averaging 9.5% this year, so if the 11% or more forecasts for the first quarter are met, then to meet the World Bank estimate, Chinese growth will have to slow. There’s a few rate rises in that question for Australia over the rest of this year. In fact, the extent any slowdown in China will influence the number of rate rises here this year and next.

Greece update: Greece’s four major banks have been forced to ask the government for funding help from the €28 billion remaining in the government’s rescue fund after they were hit by the loss of €10 billion of deposits in January and February. That is a very worrying sign for the crippled economy. According to the central bank, the money transferred offshore was equal to 4.5% of total deposits in the Greek banking system. Some of the money went offshore to subsidiaries, some of it was deposited in foreign banks in Greece. The big four banks have asked for €17 billion of loan guarantees and special bonds that can be used as collateral for borrowing from the European Central Bank. The news kept the premium Greek government debt costs compared to the cost of German government debt above 4%. The debt spiral is ratcheting up and needs to be broken if Greece is to avoid default.

Aussie car surge: US and European car sales continue to rise tentatively, but no major car economy has been able to claim a record monthly sales figure without some sort of government boost in the past couple of years , and yet that’s what happened in Australia last month. Figures from the Federal Chamber of Automotive Industries (FCAI) show that 94,744 passenger cars, SUVs and commercial vehicles were sold in March, up 25.2% (or 19,094 vehicles) on the same month in 2009. It was also 352  more than the previous record of 94,392 in March, 2007. A 300% plus rise in sales to car rental firms helped.

SUVs back: SUV sales led the charge in March up 44.1%, followed by passenger cars (up 23.5%), heavy commercials (up 20.2%) and light commercials (up 12%). Year-to-date, 251,827 vehicles have been sold — an increase of 38,857  (18.2%) compared to the first three months of 2009 when nearly 213,000 were sold and approaching the record 263,453 vehicles sold in the first three months of 2008.

Hybrids small beer: Hybrids are still small beer, and corporates are bigger buyers than private owners. The figures show that in the first quarter of 2010, 269 passenger hybrids were sold to private buyers (122 a in the first quarter of 2009) and 1544 were sold to non-private buyers (corporates), up from 636 in the first quarter of 2009. There were 117 private hybrids sold in the first three months of this year against 67 a year ago and 108 non-private hybrids sold this year (64 in the March quarter of last year).

Diesels more popular: Diesels continue to sell well: 5489 in the March quarter for private passenger cars, against 3642 in the same period of last year and 5460 non-private passengers cars versus 4182 in 2009. For private SUV diesels, 8188 were sold in the March quarter of this year versus 6125 a year ago. For non-private SUVs, 10,702 so far this year versus 7194 in the same period of 2009. Private light commercials, 5801 versus 5703 and non-private light commercials, 24,776 versus 19, 625. of the There were 1847 more diesels sold to private passenger car buyers in the first three months of this year than in the same period of 2009. That exceeded the 1769 extra petrol cars sold to private buyers in the same period.

Peter Fray

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