Separate report on China's Manufacturing PMI showed that index came in at 49.4, down 0.3 points from March's reading. No change was expected. All of the index's categories indicated conditions worsened month-on-month, with output slipping back below the 50-point neutral level. The fluctuations indicate the economy lacks a solid foundation for recovery and is still in the process of bottoming out. The government needs to keep a close watch on the risk of a further economic downturn."
However, the focus of the session was on RBA interest rate decision and the following statement. Australia's central bank cut interest rates to a fresh record low as it moves to counter the emergence of disinflation that's swept the developed world and limit currency gains that could complicate an economic transition. Reserve Bank of Australia Governor Glenn Stevens and his board lowered the cash rate by 25 basis points to 1.75 percent Tuesday, as predicted by 12 of 27 economists survey. "Inflation has been quite low for some time and recent data were unexpectedly low," Stevens said in his statement. "These results, together with ongoing very subdued growth in labor costs and very low cost pressures elsewhere in the world, point to a lower outlook for inflation than previously forecast."
The RBA reiterated that "an appreciating exchange rate could complicate" the economy's transition. It also noted the rebound in the iron ore price in response to policy easing in China, Australia's biggest trading partner."Commodity prices have firmed noticeably from recent lows, but this follows very substantial declines over the past couple of years," Stevens said. "Australia's terms of trade remain much lower than they had been in recent years."
Thursday was marked by Retail Sales and Trade Balance figures. The seasonally adjusted Australian Retail Sales rose 0.4% in March 2016. Analysts were predicting 0.3% increase. This follows a rise of 0.1% in February 2016 and a rise of 0.4% in January 2016. In trend terms, Australian turnover rose 3.6% in March 2016 compared with March 2015.The following industries rose in trend terms in March 2016: Food retailing (0.1%), Clothing, footwear and personal accessory retailing (0.7%), Household goods retailing (0.2%), Other retailing (0.2%) and Department stores (0.1%). Cafes, restaurants and takeaway food services (0.0%) was relatively unchanged in trend terms in March 2016.
Separate report showed that in seasonally adjusted terms, the balance on goods and services was a deficit of $2,163m in March 2016, a decrease of $881m (29%) on the deficit in February 2016, below expected deficit of $2.950m. Goods and services credits rose $1,084m (4%) to $26,529m, while goods and services debits rose $203m (1%) to $28,692m. goods and services credits rose $1,084m (4%) to $26,529m. goods and services debits rose $203m (1%) to $28,692m.
Friday brought RBA Monetary Policy Statement."After previously forecasting that underlying inflation would be 2.0% this year and around 2.5% next year, the RBA has concluded that it will stay at 1.5% in the second quarter and will stay below 2% all of next year. Part of the downward revision is due to the fact that underlying inflation fell much further than the RBA expected in the first quarter. But the Bank has also concluded that wage growth will remain lower for longer. The clear implication is that monetary policy will need to do more to boost underlying inflation. Tuesday's 0.25% rate cut to 1.75% will probably be followed by another cut in August."
This week markets will be looking at:
China's CPI/PPI (Tuesday 3:30)
