Retail up/flat: According to the Australian Bureau of Statistics March retail sales figures rose 0.3% (seasonally adjusted) after the 1.2% fall in February, to be up 0.1% for the March quarter. That’s a bit better than expected after more than half a dozen leading retailers revealed poor sales updates. The March quarter figure, however, is down sharply from the 1% contribution in the December quarter and confirms that retail activity was very subdued. That points to a lower contribution to March GDP from consumption and consumer spending. The ABS said retail sales rose across five retail industry groups: clothing, footwear and other personal accessory retailing (1.4%), department stores (1.1%), other retailing (0.9%), cafes, restaurants and takeaway food services (0.7%) and food retailing (0.3%). Sales fell in household goods retailing (-1.0%). Sales were up in the ACT, (1.3%), NSW, (1.2%), the Northern Territory (0.9%), South Australia (0.5%) and Western Australia (0.4%). Sales fell in Tasmania (-1.0%), Queensland (-0.5%) and Victoria (-0.1%).

Trade deficit expands/shrinks: The ABS said the trade deficit rose in March to $2082 million (seasonally adjusted) an increase of $381 million on the revised deficit in February 2010 (cut by $223 million). That left a trade deficit for the March quarter seasonally adjusted, of $4734 million, down $808 million on the deficit of $5542 million for the three months to December 2009. However, if the seasonal factors used in compiling quarterly balance of payments are applied, the March quarter 2010 deficit was $4618 million, a decrease of $989 million on the revised December quarter 2009 deficit of $5607 million. That looks like being a positive for growth. There should be a sharp rise in export income from April, because of higher iron ore and coal prices.

Forecast: The Reserve Bank publishes its second statement of monetary policy tomorrow at 11.30am and buried in it will be upgraded inflation and growth forecasts. The inflation forecast will be near 3%, as alluded to in Tuesday’s post-board meeting rate rise statement by governor Glenn Stevens. “Inflation now appears likely to be in the upper half of the target zone over the coming year. The growth estimates will be higher: output growth over the year ahead is likely to exceed that seen last year, even though the effects of earlier expansionary policy measures will be diminishing.”

Watch the terms of trade: But more importantly, the estimate for the rise in the terms of trade this year will be eye opening: “Australia’s terms of trade are rising by more than earlier expected, and this year will probably regain the peak seen in 2008,”  Stevens said. That graph published on Tuesday from the RBA of the surge in the commodity price index last month (at least 15% in a month) hints at the rise now forecast for the terms of trade for this year. Next year is another thing, and another point to remember is that with prices for iron ore and the various coals now fixed quarterly or priced on the spot market, the terms of trade will become harder to estimate and more volatile.

Are they still alive? Some hard heads among money people would tell you that the collapse of Lehman Brothers, while terrible, wasn’t the start of the implosion, it was the bailout several weeks earlier of Freddie Mac and Fannie Mae, the two imprudent US government “owned” private mortgage financiers. They ran out of money and seeing they controlled 60% of the then US home mortgage market (closer to 90% at the moment) they had to be formally taken over by Washington. So they have continued to trade in government ownership, losing money and sticking their hands out for help. Yesterday Freddie owned up to another $US6.7 billion of losses and asked the government for another $US10.6 billion to cover losses. In February, the bigger Fannie revealed a loss of $US16.3 billion and asked for $US15.3 billion. So another $US25 billion or more just to keep the Zombies alive and through them, the US housing market. So when you hear of the US housing market coming back, don’t believe it. It’s all down to the government ownership and support for Fannie and Freddie. Without them there’s be no mortgage refinancing and lending would be so low as to be derisory. Their financial predicament is so complex that the Obama Administration keeps delaying any attempt to sort it out.

Shops slow, car yards fast: Retail sales may be sluggish, but not car sales. April sales overall were the second highest on record for that month, with. 81,401 passenger cars, SUVs and commercial vehicles   sold, a rise of 27.3% on the depressed April of last year (when sales were just starting to recovery from the dive earlier in the year) . That’s 17,436 more vehicles sold on a year ago, which makes for a lot of cream around car yards, importers and finance groups.

Diesels very strong: Sales of diesel cars continue to rise. The latest car sales figures from the industry show diesel’s share of sales in April was 26%, two share points higher than a year ago. For the first four months of the year, the share was also up two points to about 25%. Diesel models now make up about 18% of all private sales. As pointed out last month, hybrid sales are slow by comparison. The new Toyota Camry Hybrid is struggling to find buyers. Toyota thought it could sell about 10,000 petrol-electric Camry hybrids a year, with fleet and government buyers the major outlets. No go. Sales are averaging 560 a month or an annual rate of just under 7000. There’s $35 million of our taxpayers’ money in that one.

The pious abandon the Prius: But at least sales of these are growing, the older Toyota Prius is no longer green machine of the month. Sales have fallen 27%, in a market up 20% in the first four months of year, and with diesels taking much of their business. All those Green can’t afford the Prius or the Camry hybrid. Being Green costs, even if being diesel is cheaper and more economical.

Softening up: This story on the Xinhua website overnight is a sign the Chinese government is starting to get worried about inflation. The article warns that consumer price inflation looks to have jumped last month after falling in March. The key inflation gauge may increase by about 2.8% year-on-year in April, 0.4 percentage points higher than that of March. During February, the CPI grew by 2.7% — the fastest clip in 15 months. The figures are out May 11.

Why? Soaring food prices, especially for vegetables, pork, eggs and fish, were listed as the cause. Analysts  warn that the Producer Price Index, up more than 5% (annual rate) in March, should also be watched.

News Corp watch: And while Avatar is the star of Rupert Murdoch’s balance sheet at news Corp, along with the right-wing Fox Network News, another star is losing its sheen. American Idol is having a shocker of a season so far, sinking slowly as it loses viewers week after week and sees the older skewing Dancing With The Stars (the Seven Network’s glitzy version) go past it. Idol hit another ratings low on Tuesday night: 17.1 million viewers instead of the 23.4 million a year ago for the same show. Dancing had 19.6 million. Idol still has a solid lock on the 18-49 group, the key demo in US TV, but even there it had its lowest share Tuesday night since it premiered in the northern summer of 2002. Dancing’s figures are weaker as well, down 20% on a year ago for some eps. Viewing this year on US TV has fallen noticeably and there doesn’t seem to be any real factor. And don’t blame PVRs like Tivo. US research shows people with PVRs watch more TV than people without, and that includes cable as well as free-to-air.

Going cheap: The Washington Post Co is looking to see if anyone is interested in buying Newsweek after three years of slumping sales, losses and falling ad content. The mag looks as if  it lost $US29 million last year. Bloomberg bought the almost-broke Business Week last year from McGraw Hill for a reported $US5 million or so. Newsweek could be cheaper because it doesn’t have the strong suit that Business Week had with its corporate coverage. The Post Co said Newsweek’s circulation is down 37% from 2007 and sales at news stands are off 44%. It’s expected to lose money again this year for the fourth year in a row. If there’s no buyers, it will probably close.

Peter Fray

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