Houses and Holes

46

Is unemployment about to jump?

Yesterday, Roy Morgan Research released their latest poll on unemployment and and it caused a minor stir amongst market watchers: In July 2011 Australia’s total unemployment as measured by Roy Morgan was 885,000 (7.6%), up 40,000 (0.6%) from June 2011, and up 148,000 (up 1.3%) since July 2010. The Roy Morgan July 2011 ‘underemployed’* estimate was virtually

31

In-credible retail falls

ABS June retail sales are out and it’s more of the same with the seasonally adjusted estimate falling 0.1%. This follows a fall of 0.6% in May 2011 and a rise of 1.0% in April 2011. On to the charts. The first shows that the result was a big miss versus market expectations, God only knows

1

Services sector still in recession, or is it?

The AIG PSI Index for July is out this morning and makes interesting reading with the services sector still in recession, but without the same collapse seen in Monday’s manufacturing gauge: ■  The services sector contracted in July, with the latest seasonally  adjusted Australian Industry Group/Commonwealth Bank  Australian Performance of Services Index (Australian PSI®) rising 

35

Whither now the US?

I’ve been warning for a couple of months that the US economy is in trouble. It’s hasn’t really been that hard to see, so long as you recognise its underlying condition. The US economy is in a depression. It’s not quite the kind we saw in the 1930s but it’s a depression nonetheless, just slower

11

Building approvals by state

Following are a series of charts drawn from today’s ABS Building Approvals numbers. First up, is the national chart for dwelling approvals, which doesn’t look too bad, though is obviously in a significant declining trend, giving back after last year’s stimulus dragged forward demand: When we break down by state, however, we get a very

62

The agony of the bullhawks

As the bullhawks (Joye & Carr) withdraw to their high eyries, dragging the bloodied corpse of Terry McCrann with them, they should take a moment to raise their razor sharp beaks a few points above the strictures of yesterday’s war. Strict adherence to an inflation band is sensibly modified by an appreciation of imminent risks, whether

66

No hike

Statement by Glenn Stevens, Governor: Monetary Policy Decision At its meeting today, the Board decided to leave the cash rate unchanged at 4.75 per cent. The global economy is continuing its expansion, but the pace of growth slowed in the June quarter. The supply-chain disruptions from the Japanese earthquake and the dampening effects of high commodity

42

A modest proposal for manufacturing

If there’s one thing that bugs me about the Australian economy and business it is rent-seeking. It is that practice of big businesses wielding political power for shareholder and personal gain. It is a doubly toxic pursuit because it not only means that Australians often have to pay extortionate prices for goods but it retards

25

How many job losses will satisfy the RBA?

There is a technical economic concept that you should get to know, if you don’t already know it. It’s called the Phillips Curve. And it may be about to change your life. Basically, it posits an inverse relationship between rates of unemployment and rates of inflation. That is, the lower the former, the higher the

34

New home sales tank

The mining sector is about to get a whole new batch of construction workers to choose from if the HIA new home sale report for June  is any guide. The index collapsed to GFC levels. The HIA has this to say: New home sales suffered their heaviest monthly decline in five years in June 2011, providing

14

Manufacturing tanks

The adjustment we all had to have is going gangbusters now. Having been in recession for the better part of a year, manufacturing activity fell off a cliff in July. Here’s what the mild-mannered folk at the Australian Industry Group had to say about the ongoing extinction of their members: ■ Manufacturing activity slumped in

39

Turning a soft landing hard

Sigh. I apologise for the ceaseless battery of bearish outlooks this morning but damn, that’s the way the world is going, and I’m not going to “pull a Yardney” and pretend it isn’t so that yours and my hard earned capital goes up in smoke. This morning we have two excellent pieces on the debt-ceiling

19

CBA’s online retail report

  CBA have released an excellent piece of research this morning that helps demystify foreign online spending by Australian consumers. The research is drawn from the bank’s credit card and merchant businesses. It’s a must read this one. Full report below. A million customers can’t be wrong There has been a dearth of reliable data

22

A bullhawk macrobated?

Well…probably not. But spare a thought for HSBC’s Paul Bloxham, who, having predicted an August rate rise all year, and only pushed out his predicted timeline for a hike a week or more ago, suddenly finds his fellow bullhawks (Joye and Carr) taking to the higher atmospheres, screetching for an August move. This morning he

76

I am beneficent

Yesterday, to tremendously little fanfare, the Treasurer, Wayne Swan, released his Discussion Paper for the tax summit to take place in October this year. Find the document below. There is not much point going into the full details of the document. Most of it is framework and fluff. And, really, given the extraordinary pressures that

43

Another “affordability” study

  Below find the new National Centre for Social And Economic Modeling (NATSEM) report into housing affordability. The report is both quite good and quite frustrating. It acknowledges the severe unaffordability of the national housing market but never uses the word “bubble”.  As such, it provides some very good overvaluation assessments but fails completely to canvass

54

The horns of a dilemma

Yesterday’s CPI number sent the Bullhawks (Carr, Joye, Bloxham) into the stratosphere. The leader of the group, Chris Joye, had the following to say on his blog: Well, as predicted here more consistently and loudly than pretty much anywhere, Australia officially has a major inflation problem. And I mean “major”. Underlying or core inflation has

53

Abusing money for power

For me, the most remarkable part of writing The Great Crash of 2008 with Ross Garnaut was diving into the murky depths of Wall St’s extraordinary manipulation of money. In the book, we called this “Clever Money”. It was the story of how, over many years, Wall St took the plain vanilla process of securitisation,

9

Moody’s warns on Aussie housing market

Try as I might, I can’t find any reference in the Australian media (could be wrong) to a press release this afternoon by Moody’s warning of trouble ahead for the Australian housing market and a review of RMBS ratings. Thankfully in New Zealand they still seem to breathing (via Alex Tarrant at Interest.co.nz): Sydney, July 26, 2011

27

Glenn Stevens macrobated

Well, so much for being the lunatic fringe. The Governor of the Reserve Bank of Australia has delivered a seminal speech on the Australain consumer this afternoon and regular readers can pretty much throw it away. They have read it here for the past six months. Glenn Stevens has been “macrobated” (that is, converted to,

84

The bizarre retail debate

One of my favourite journalists, Adele Ferguson of The Age, today calls for a retail bailout: Other figures show that online spending is going gangbusters. There is an estimated $12 billion a year spent in online retail, but it could be much higher than this. Domestic online sales have been growing at 5 per cent

9

Out of time

While markets remain fixated with the debt ceiling debacle in America, I am more concerned with Europe. We’ve had just two days of gains in European sovereign bonds and already the yield blowout has resumed. Both short term and long term Italian bonds were under pressure overnight: The same for Spain: It was the same

18

Access goes all in on rate rises

Boy, do we have a market in interest rates. From Bloomberg: Australia’s central bank will increase interest rates three times in the coming year as a mining boom boosts wages and helps the economy recover from natural disasters, a Deloitte Access Economics report showed. High resource prices and strong demand will boost Australian incomes and there

5

Producer prices ease, but…

JUNE KEY POINTS FINAL (STAGE 3) COMMODITIES increased by 0.8% in the June quarter 2011. mainly due to rises in the prices received for building construction (+1.2%), petroleum refining (+10.3%) and other agriculture (+7.9%). partly offset by falls in the prices received for industrial machinery and equipment manufacturing (-2.0%). increased by 3.4% through the year

27

Australian stagflation

Late last week, the venerable Melbourne Institute released its Monthly Bulletin of Economic Trends. In it, the economists of the institute predicted that Australia is headed back to the seventies with a bullet: Policy dilemmas ahead … In contrast to other forecasters, we have cautioned for some months now that GDP growth is likely to be

61

Don’t mention the savings

Two senior Australian business and economics commentators today make throwaway arguments about the struggles of the retail sector. First, it’s Alan Kohler, who dedicates his column to explaining how retail is suffering from Dutch disease. His argument is as follows: Retailing is the bedrock of the economy, employing about 1.3 million people directly and touching

38

Peak everything

Below find Jeremy Grantham’s latest quarterly newsletter. In it he draws out his thesis that the world stands at the edge of peak everything. Here is his executive summary on likely outcomes: Summary We humans have the brains and the means to reach real planetary sustainability. The problem is with us and our focus on

0

CPI preview

NAB has produced a rather useful guide to next week’s CPI read, which all seem to think will be crucial in determining the August interest rate outcome. Personally, I think there’s little chance of a hike, not least because three days later, when it releases its quarterly Statement on Monetary Policy, the bank is most likely

25

A new bullhawkian argument

Today’s bullhawkian charge cannot go without a prod. According to Chris Joye writing in Smart Company: There is mounting evidence to suggest that Australia’s housing market rests at a critical juncture…In my opinion, the near-term destiny of Australia’s housing market very much depends on next week’s second-quarter inflation numbers. If inflation is low, the RBA

7

European risk rally?

News this morning is that there is something of a breakthrough in Eurozone negotiations. From the FT: Germany and France appeared to settle their differences late on Wednesday over a new rescue package for Greece. No immediate details were available but Steffen Seibert, a spokesman for Angela Merkel, the German chancellor, said “a common German-French