Australian Economy Shows Mixed Signals in Q4 but Global Markets Doing Well Overall

It could be tough for the Australian economy in 2014
Photo: eGuide Travel

A tough 2014 is widely predicted for the Australian economy. If this happens, it will likely have a negative impact on the housing market.

Whilst it is too early to begin economic analysis for the current year, November 2013 data released by Westpac shows mixed results for our economy.  

Retail Sales Figures Rose Again but Concerns Remain Over Labour Market

Following a 0.5 per cent increase in October, retail sales rose again by 0.7 per cent in November.  

Although sales figures have been improving steadily since August 2013, the year-to-date growth of 4.5 per cent is somewhat modest against a background of positive consumer sentiment, rising house prices and low interest rates.

“A potential reason for cautious spending is likely to involve concerns over the job market.”

Breaking down the results by state, WA, SA and Victoria did the best in November, with increases of 1.3 per cent, 0.9 per cent and 0.9 per cent respectively. This brings annualised trend growth rates to 9 per cent for Victoria, 8 per cent for NSW, 5 per cent for Queensland and 4 per cent for WA.

A potential reason for cautious spending is likely to involve concerns over the job market. Employment growth has been slow for the year to November, with the unemployment rate at 5.8 per cent almost catching up to the post GFC high of 5.9 per cent.

As bleak December job data revealed further job losses, consumer spending will likely be impacted due to softened sentiment.    

Building Approvals Fell, Housing Finance Expected to Rise but Not For First Home Buyers

Following a fall of 1.5 per cent in October, building approvals fell again by 1.4 per cent in November. 

This result was largely due to the decline of multiple-dwelling approvals, down by 9.7 per cent in November, but was partially offset by private sector house approvals which rose significantly by 6 per cent.  

“First home buyers’ finance approvals are at an all-time low due to affordability issues and changes in government assistance.”

In terms of housing finance, approvals are expected to rise moderately by 1.5 per cent, continuing gains seen in September (4.4 per cent) and October (1 per cent). 

Despite these encouraging figures, first home buyers’ finance approvals are at an all-time low due to affordability issues and changes in government assistance.

Meanwhile, global markets that strongly influence the Australian economy appear to be showing signs of overall economic improvement.

United States: Stronger Retail Sales, Industrial Production and Manufacturing

Retail sales rose 0.7 per cent in November while industrial production was 1.1 per cent higher.  Manufacturing experienced its strongest months for 2013 in October and November, with gains of 0.5 per cent and 0.6 per cent respectively.

However, US job growth has fallen sharply for December with only 74,000 jobs created; the lowest number in the last three years.

China: Manufacturing and Services Still Growing but at Weaker Rates

HSBC China Composite PMI data, which covers manufacturing and services, signalled increase in outputs and new orders for December though at weaker rates.

Manufacturers reported net staff reductions while service providers increased payroll numbers.

Eurozone:  Better Morale Evidence of Slow Recovery

According to the latest data from the European Commission, economic sentiment amongst the Eurozone rose in December and inflation expectations were also positive.

Unemployment numbers are also predicted to fall, with jobs to be created in manufacturing, retail and construction sectors.

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