A great scene setter from Europe and the markets this morning for what will be a ropey 2012-13 federal budget tomorrow. But to confuse us all, its not all gloom and doom from the economy and contrary to common wisdom and retailer updates, we are spending and spending very nicely in shops, cafes and the like. In fact, retail trading is a lot stronger and broader than updates from retailers suggest; and there was also an uptick in building approvals in March as well, but a fall in job ads on April. But more of that later.
But that’s local. The fall in markets in Asia was a global reaction. In Australia, shares were off well over 1.2%, Japan (returning from a long holiday) off by more than 2% at one stage; the Aussie dollar is starting to eye parity at just over $US1.01 and off a couple of cents in a week. As to why, well take your pick, weak US jobs figures (is it a replay of 2011 and 2010?) or the austerity-rejecting election results in France, Greece and the small German state of Schleswig-Holstein?
But while the eyes of markets and others were on Europe and Francois Hollande’s predicted win in the French presidential poll and the expected messy outcome in Greece with anti-austerity parties winning about 58% of the vote, not to mention the weak result in the German state poll for Chancellor Angela Merkel (ahead of a more important state election next Sunday), the results were not a surprise; opinion polls have been telling us for two weeks or more that this would be the outcome, especially in Greece and France.
So the big falls and breathless headlines this morning about $19 billion being wiped off the value of local shares were more due to the ignorance of local investors than a genuine market reaction. Likewise, sonorous commentaries about what the results presage tells us the authors and those who run their outlets have been dozing, like investors. Yes, Europe is back in the frame as a destabiliser of the global economy and financial markets, a repeat of what happened in 2010 and 2011 … we survived that, but this year, and especially Greece, which is looking ungovernable?
Look closer at home and there’s a bit more substance about the economy ahead of the budget tomorrow night. The conventional wisdom is that the domestic economy is sluggish to falling in a ditch. Many commentators say the Reserve Bank’s 0.50% rate cut last week suggested demand was weak to fading, but that cut was as much aimed at the bashing bank lending rates lower than they would have fallen with a cut of just 0.25%.
So this morning we got a surprise: a sharp rise in seasonally adjusted retail sales in March and for the March quarter, which belies the tales of woe and downgrades from the sector (JB Hi-Fi and Harvey Norman).
Someone must be spending because the ABS said retail sales jumped a seasonally adjusted 0.9% in March, (market economists had forecast a rise of 0.2%, so they were clearly out of touch). Even the trend figure was a reasonable 0.3% rise (it attempts to give a smoother reading). The 0.9% rise in March was after a 0.3% rise in February and 0.4% in January. In fact the January and February figures have been nudged 0.1% higher in revisions in the past two months. So all up the seasonally adjusted improvement for the March quarter was a solid 1.6%. The trend increase for the quarter was 0.8%, made up of 0.3% in March, the same in February and a rise of 0.2% in January. In other words, there is a clear improvement in retail sales in 2012.
The ABS said the “largest contributor to the rise was food retailing (0.9%), followed by cafes, restaurants and takeaway food services (2.0%), clothing, footwear and personal accessory retailing (1.6%), other retailing (0.5%), household goods retailing (0.4%) and department stores (0.7%). The state that was the largest contributor to the rise was New South Wales (1.2%), followed by Victoria (1.3%), Western Australia (1.2%), South Australia (0.6%), Queensland (0.2%), the Australian Capital Territory (1.5%), Tasmania (0.5%) and the Northern Territory (0.4%).”
In volume terms, the ABS said turnover rose 1.8% in the March quarter, seasonally adjusted, (the market forecast was just 0.4%, so another miss), following a rise of 0.5% in the December quarter 2011: that is a clear improvement, even if there was price deflation. The volume increase in trend terms was 1%, up from 0.4% in the December quarter.
The ABS said building approvals in March saw a sharper than expected improvement in private and non-private dwellings.
The ABS said there was a seasonally adjusted 7.4% rise in total new dwelling approvals, a turnaround from the 8.8% plunge in February. That was made up of a solid 3.9% rise in private-sector houses (compared with the 4.9% drop in February) and a 15.3% rise in non-house dwelling approvals (apartments, townhouses, etc), compared with the 17.3% fall in February. This part of the series is subject to volatile swings linked to the way local government approvals are bunched and approved.
In other business news, the National Australia Bank’s April business survey showed a weakening in business conditions, but a small rise in business confidence. And the ANZ job ads survey for April fell, but more important was the disclosure by the ANZ that there could be trouble with some of the figures for previous months, which showed a solid 12% rise in job ads in the March quarter.
The ANZ said job ads fell 3.1% in April and the bank also revised lower the job ads growth in March from 1% to 0.7%, warning that recent monthly data should be treated with caution.
“ANZ is currently investigating the reliability of data provided by a small internet website, which has been driving the recent improving trend in overall job advertising,” the bank said.
ANZ head of Australian economics Ivan Colhoun said annual growth in the series may be overstated by as much as 5-7 percentage points.
The April jobs and unemployment figures are out on Thursday and the March trade figures will be released tomorrow.