The government’s official manufacturing purchasing managers’ index (PMI) declined slightly to 49.9 in July on a scale where a reading below 50 is generally associated with economic expansion. The official manufacturing PMI gauge has hovered right around 50 since March after seven months of contraction. A median estimate of economists called for a PMI reading of 50.1.
Tuesday was marked by Trade Balance and Building Approvals figures. In trend terms, the balance on goods and services was a deficit of $2,359m in June 2016, a decrease of $14m (1%) on the deficit in May 2016. In seasonally adjusted terms, the balance on goods and services was a deficit of $3,195m in June 2016, an increase of $777m (32%) on the deficit in May 2016. In seasonally adjusted terms, goods and services credits fell $213m (1%) to $25,803m, while goods and services debits rose $564 (2%) to $28,998m.
Separate report on Building Approvals showed that in seasonally adjusted terms, total dwelling approvals decreased 2.9 per cent, with both total other residential dwelling approvals (3.4 per cent) and total houses (2.4 per cent) recording falls. The value of total building approved rose 1.2 per cent in June, in trend terms, and has risen for six months. The value of residential building rose 0.1 per cent while non-residential building rose 3.7 per cent.
However the focus of the session was on RBA interest rate decision and the following statement. The Reserve Bank of Australia (RBA) cut interest rates by 25 basis points to a fresh record-low of 1.50% at its August monetary policy meeting, a decision that was expected by a majority of economists and those in financial markets. On the reasoning for the decision, the board stated “that prospects for sustainable growth in the economy, with inflation returning to target over time, would be improved by easing monetary policy at this meeting”.
On the outlook for inflation, the sole reason cited by many analysts to justify an additional rate cut, the board acknowledged that “recent data confirm that inflation remains quite low”. “Given very subdued growth in labour costs and very low cost pressures elsewhere in the world, this is expected to remain the case for some time,” the statement read. Contributing to weak inflationary pressures through heightened levels of labour market slack, the RBA noted that “labour market indicators continue to be somewhat mixed”, although acknowledged that it remains “consistent with a modest pace of expansion in employment in the near term”.
From Australia, on Thursday, Retail Sales figures were released. Australian Retail Sales rose 0.2% in June 2016. This follows a rise of 0.2% in May 2016 and a rise of 0.2% in April 2016. The seasonally adjusted estimate rose 0.1% in June 2016. This follows a rise of 0.2% in May 2016 and a rise of 0.1% in April 2016. In trend terms, Australian turnover rose 3.1% in June 2016 compared with June 2015.
This week markets will be looking at:
China Trade Balance (Monday)
China CPI/PPI (Tuesday 3:30)
NAB Business Confidence (Tuesday 3:30)
China's Industrial Production (Friday 3:30)
