Our tracking of six separate data series (see Figure 1), shows a clear turn lower across interest sensitive parts of the economy. Given it has now been almost 12 months since the most recent RBA rate cut, some softening in yearly growth in housing finance (Figure 2) and retail sales (Figure 3) does seem about ‘right’.
The change in cash rates and housing finance Housing finance (ex-refin.) (LHS) Cash rate adj for increases in owner-occupier borrowing costs (inverted scale, RHS) yoy% yoy ppt chg Source: Deutsche Bank, ABS, Bloomberg Financial LP, Melbourne Institute Source: Deutsche Bank, ABS At the same time, however, the NAB business survey is reporting robust conditions. Figure 4 suggests, though, that our interest sensitive tracker can lead business conditions from the NAB survey by around six months. This raises the risk that the business conditions index from the NAB survey could trend lower over the second half of 2016.
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David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific's leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
