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1 Nov 2013
Australian PMI further evidence RBA comfortably on hold
FXstreet.com (Barcelona) - Australia continues to show improved economic indicators, with the latest upbeat surprise being a jump in the AIG PMI for October, which saw a 1.5 points increase to 53.2, resulting on the 2nd consecutive month above 50.
Key findings - AIG
"This month’s overall expansion was driven by stronger readings (with levels above 50 points) for the new orders and production sub-indexes. The sub-index for supplier deliveries also remained above 50 points, albeit at a slightly weaker level than in September. The employment sub-index continues to suggest contraction, at 48.6 points."
" Across the sub-sectors, expansion was again strongest in the food, beverages and tobacco sub-sector, with mild expansion evident in some of the smaller sub-sectors. The metal products and machinery and equipment sub-sectors continue to show contraction."
“While there are certainly encouraging signs, it is too early to call a recovery with a good share of the gains representing a catch-up following a very slow mid-year period,” said AIG chief executive Innes Willox.
Consequence for the RBA outlook: Every bit counts
Yesterday, we learned that housing approvals in Australia skyrocketed in September, which adds to the tentatively optimistic readings in the manufacturing sector, sentiment in the economy on the rise, all combined with further evidence that a housing bubble is brewing down under.
These are certainly not the indicators a Central Bank would like to see to keep an accommodative, event neutral monetary policy much longer, rather these are signs that if anything, next move in rates might be up. While there are, nevertheless, some contradictory arguments which warrant caution, such as weakening jobs market and high AUD, it is hard to make a case for further cuts as things stand.
According to Eamonn Sheridan from Forexlive: "If you were on the board of a central bank in Australia and you saw manufacturing tentatively improving, good expansion in building approvals, sentiment/confidence improving, and house prices rising you may very well think that you wouldn’t want to go cutting interest rates again, that the easing cycle could well be over, and maybe even the possibility of hiking them would be starting to nudge onto your radar."
Key findings - AIG
"This month’s overall expansion was driven by stronger readings (with levels above 50 points) for the new orders and production sub-indexes. The sub-index for supplier deliveries also remained above 50 points, albeit at a slightly weaker level than in September. The employment sub-index continues to suggest contraction, at 48.6 points."
" Across the sub-sectors, expansion was again strongest in the food, beverages and tobacco sub-sector, with mild expansion evident in some of the smaller sub-sectors. The metal products and machinery and equipment sub-sectors continue to show contraction."
“While there are certainly encouraging signs, it is too early to call a recovery with a good share of the gains representing a catch-up following a very slow mid-year period,” said AIG chief executive Innes Willox.
Consequence for the RBA outlook: Every bit counts
Yesterday, we learned that housing approvals in Australia skyrocketed in September, which adds to the tentatively optimistic readings in the manufacturing sector, sentiment in the economy on the rise, all combined with further evidence that a housing bubble is brewing down under.
These are certainly not the indicators a Central Bank would like to see to keep an accommodative, event neutral monetary policy much longer, rather these are signs that if anything, next move in rates might be up. While there are, nevertheless, some contradictory arguments which warrant caution, such as weakening jobs market and high AUD, it is hard to make a case for further cuts as things stand.
According to Eamonn Sheridan from Forexlive: "If you were on the board of a central bank in Australia and you saw manufacturing tentatively improving, good expansion in building approvals, sentiment/confidence improving, and house prices rising you may very well think that you wouldn’t want to go cutting interest rates again, that the easing cycle could well be over, and maybe even the possibility of hiking them would be starting to nudge onto your radar."