Tuesday, November 9, 2010

Key Data Previews

NZ Oct REINZ house price index
Nov 12, Last: –1.2% yr

  • The NZ housing market remains moribund. House sales were down sharply in September, although that partly reflects the impact of the Canterbury earthquake. By our estimates, excluding the effect of earthquake there would have been a 2.7% decline in national house sales in September.
  • House prices remain weak in this environment. The REINZ house price index was down 0.3% in Sep, to be 1.2% lower than a year ago and 5.6% below the November 2007 peak. Again, the earthquake may have polluted the national figures.
  • Data from a major Auckland real estate company suggest the weakness in sales continued through October. But while the market is currently very weak, we are now anticipating some improvement (i.e. turnover rising a bit and prices stabilising) at the tail end of this year or early next year, largely as a result of lower fixed mortgage rates and improving net migration.

Aus Nov Westpac-MI Consumer Sentiment
Nov 10, Last: 117.0

  • The Westpac-Melbourne Institute Index of Consumer Sentiment rose 3.3% in Oct, regaining most of the 5% slip in Sep and holding at relatively high levels overall. The positive run of economic news continued with an extra boost from the RBA’s surprise decision to leave rates unchanged in Oct. The survey detail also showed a sharp 9.9% jump in responses on whether now was ‘a good time to buy a major item’ to a 5yr high – a sign that we may see more flow through to spending.
  • The Nov survey is in the field the week ended Nov 7. The RBA’s surprise 25bp rate rise and additional increases in banks’ standard variable mortgage rates will clearly impact. Other economic news has mainly been downbeat as well with sluggish retail sales, falling dwelling approvals and stalling house price growth although the strong AUD may be a positive. That said, all of these factors will tend to fade into the backdrop given interest rate developments.

Aus Sep housing finance
Nov 10, Last: 1.0%, WBC f/c: 2.0%, Mkt f/c: 1.0%, Range: –0.6% to 2.0%

  • Demand for housing finance was forming a base early in the second half of 2010, with the RBA on hold from June.
  • Finance to owner-occupiers is forecast to rise by 2.0% in September. That follows small gains over July and August and a net decline of just 1.1% over the four months since March.
  • Labour market strength and the resulting boost to household incomes is supportive of the housing market. As is strong population growth and pent-up demand. Not surprisingly, consumers are positive. The Westpac-MI Consumer Sentiment Index rebounded from a low of just 102 in June to 113 in July and was at 117.0 in October.
  • As for Investors, the upward trend in finance faltered over the last three months with a cumulative 10% decline. We expect this to be only a temporary setback.

Aus Oct employment chg
Nov 11, Last: 49.5k, WBC f/c: 20k, Mkt f/c: 20k, Range: 0k to 35k

  • Sep jobs surprised on the upside, surging 49.5k after 31.6k previously, with full-time up 55.8k after 56.7k previously. Average hours worked trended up for the 7th month, but are 1.8% below their mid-08 peak. Monthly trend growth has slowed to 24.3k from a Dec-09 peak of 32.9k, but annual trend growth rose to 3.1% (highest since Mar-08).
  • The jobs upturn has been fast following the rise in domestic demand growth from 3% at end-09 to 5.3%yr in 2010Q2, and at 3%yr is now consistent with that acceleration. But this lead (and a slower uptrend in job ads) argues against any further acceleration in annual jobs growth. Also, recent strength has been at odds with a lower LDI (our composite of business survey employment indices) since Apr. We f/c Oct jobs to consolidate with a 20k rise, which would see annual trend growth plateau at 3.1%, but acknowledge risks to the upside.

Aus Oct unemployment rate
Nov 11, Last: 5.1%, WBC f/c: 5.1%, Mkt f/c: 5.0%, Range: 4.9% to 5.2%

  • Strong jobs growth and the need to finance rising mortgage costs has encouraged more people back into the labour market, with the Sep participation rate rising 0.2ppts to 65.6% (vs 65.7% historic high). That drove strong labour force growth of 51.9k, offsetting the jobs surge to leave the unemployment rate steady at 5.1%, allowing the trend rate to edge down to 5.1% from 5.2%, and 5.8% a year ago.
  • Months of jobs growth around 20k following a 0.2ppt rise in participation and steady unemployment rate have historically seen a near steady participation rate, and we f/c the Oct rate to stay at 65.6%. That implies lesser labour force growth of 22.1k month, which would see the unemployment rate remain at 5.1% despite our softer, consolidative 20k jobs gain f/c. However, with upside risks for jobs, but limited upside for participation, risks are to the downside for the unemployt rate.
Full report: Key Data Previews

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