Housing up: The latest building approvals from the Australian Bureau of Statistics show a seasonally adjusted rise of 15.3% for total dwelling units approved in April, after falls in the previous two months. But that was a bit misleading. The boost came from non-private dwellings (units, etc), which rose 59.9% after falls in the previous two months. Private housing approvals were up 0.5%, which is welcome, but nothing to write home about. The surge in non-private dwelling reflects slack councils or state government planning approvals. They take so long that approvals from this source have become very volatile and unreliable. It’s been happening for several years. The ABS said the seasonally adjusted estimate for the value of all building approved rose 4.8% in March, with the seasonally adjusted estimate for the value of new residential building up a handy 6.7%, while the value of residential alterations and additions increased 12.0%. The seasonally adjusted estimate for the value of non-residential building increased 0.3%. Judging by that, there’s a solid boom in renos.

Welcome to 2007-2008: It’s forward to the past, an action replay of 2007-08; as the first resources boom brought a surge of income, inflation and pushed interest rates higher, the Reserve Bank pushed rates higher and higher to cap cost pressures. Now it’s trying to avoid a rerun in 2010 and 2011. Forget the slowing in retailing and all the guff over the mining tax. The way the RBA sees it there will be a cash flooding through the economy over the next year and perhaps more. And even if China catches cold from its overheating property market, it will still need all the iron ore, coal and other mined commodities we can supply. That’s why the RBA sees the 2008 peak in our terms of trade exceeded this year (and no one really expected that to happen until 2012-13). So just as the RBA lifted rates as the credit crunch bit in August 2007, and kept lifting them into 2008 as inflation peaked about 5%, it will continue doing so  this year to make sure inflation isn’t a problem in 2010. The central bank wants to make sure it doesn’t break higher as it did in 2007-08 after the ABS CPI inflation figures failed to pick up the underlying surge.

And 2008 and the retail slow down: After five rate rises and a drop in government stimulus, a slowing in retail sales might have been expected, but the slowing is downright sluggish (and a fall in some cases), and seems to be sharper than forecast. So much so that there’s a lot of pain. Clive Peters, the troubled Melbourne-based white goods retailer joined the likes of Harvey Norman, Woolworths, Super Cheap Auto, Coles and Fantastic Furniture in revealing sharp slowdown in the third quarter and especially March. Fantastic cut its profit and sales estimate for the full year, while Woolies has halved its 2010 sales estimates to a range of 3%-6% and Clive Peters has cut its full-year outlook and suffered a loss in the March quarter.

Sales down, Westfield says, and the RBA knows: But the best indicator is the huge Westfield mall group and its 44 shopping extravaganzas in Australia. It revealed yesterday (and the Reserve Bank would have been informed as well) that specialty stores in its 44 shopping centres across Australia experienced a dramatic slowing in sales growth in the quarter, while big supermarkets also slowed down. Sales were up just 0.3% in the March quarter. That was down sharply on the 3.3% growth in sales through all of 2009, and is also down compared with the first quarter of the same year when specialty store sales (and other sales) were rose 4.5%, thanks to the federal government’s stimulus spending.

So what was up, what was down? In contrast to the specialty store, Westfield’s figures show department store sales held up, rising 4.9% in the March 2010 quarter, against a 3.6% fall in the first quarter of last year, but big supermarkets (Coles, Woolies, Aldi, etc), saw sales rise just 0.2% in the latest quarter, compared with 3.0% in the 2009 first quarter. That certainly showed up in the way sales growth for both chains has eased. Discount department stores (that’s Big W, Target, Kmart, etc) saw growth improve to be down 0.1%, against a fall of 4.5% a year earlier. Cinemas though are booming, up 22% on a year ago when the rise was a sedate 6.8%. The breakdown of specialty categories in Westfield’s first quarter update yesterday showed slowing positive growth, or falls compared with a year ago when the stimulus really helped. This is the same set of figures for the first quarter of 2009.

And it’s just not sales slowing: Air conditioning installer and building contractor Hastie Group yesterday revealed in a market update that its retail business had slowed: “The large supermarket chains have delayed the start of work for some major projects across Australia.” That’s an interesting development.

Suing the Squid: Goldman says it has received several lawsuits from disgruntled shareholders since the US SEC’s charges were filed on April 16. In an SEC filing, the bank said it, its executives and directors faced seven legal actions related to the bank’s mortgage-related trading activities. The filing said the actions claimed “breach of fiduciary duty, corporate waste, abuse of control, mismanagement and unjust enrichment”. This move by Goldman to disclosure the lawsuits contrasts with its decision not to reveal to shareholders the SEC’s formal warning in July that it intended to press civil charges. Some of the investors’ legal actions claim the directors breached their fiduciary duty to shareholders by failing to police Goldman’s mortgage-trading desk and not revealing the SEC’s probe. Ambulance chasing, of course, and really one set of predators chasing another, but it must be worrying for Goldman’s insurers.

Chinese gamble: And with the Shanghai market off more than 14% this year so far (and to a new seven-month low yesterday), it’s no surprise that sales of lottery tickets are booming. Xinhua newsagency reported earlier this week that the state’s lottery business “earned” just over $US5 billion in the first quarter of the year, a rise of 24.5% on a year ago (which was the depths of the slump in the country). Xinhua said sales in March alone were up 15.7% on a year, while the stock market fell.

China’s car boom goes on: And while they are selling shares and buying lottery tickets, Chinese consumers still love the idea of a shiny new car. Figures out overnight reveal a 40% rise in sales of locally made cars in April. Sales of 1.39 million units were also 9.8% up from March. However, domestic auto makers produced 1.52 million vehicles in April, down 9.82% from March but still up 35.2%. In the four months to April, the number of locally made cars jumped 60% to 5.86 million, while sales (excluding exports) rose to 4.86 million. The growth is still impressive, but naturally its lower and slower than at the start of the year. The “inventory at the end of April (i.e. unsold vehicles) was about a million units, according to Xinhua. That’s a figure rarely produced in English and there was no comparison with a year ago, but it sounds high.

Peter Fray

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Peter Fray
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