• Revised ABS jobs data up to September (designed to correct for recent seasonal adjustment problems) now shows a slightly weaker jobs market over the last two months than previously reported with unemployment now drifting up to 6.2% (revised from 6.1%). This shouldn’t really be a major shock and is unlikely to have any implications for interest rates. Forward looking labour market indicators such as ANZ job ads point to some improvement ahead.
• The trade deficit for September came in worse than expected at $2.26bn with falling commodity prices clearly weighing on export values. However, the good news is that stronger export volumes are pointing to roughly a 0.7 percentage point positive contribution to September quarter GDP growth.
• Retail sales rose a stronger than expected 1.2% in September and by 1% in real terms in the September quarter.  Annual growth in retail sales growth at 5.7% (see chart below) indicates that the improvement in retail sales growth seen since late last year is being sustained with the help of low interest rates and rising wealth levels offsetting poor jobs growth and consumer sentiment.

The likely strong contribution to GDP growth from trade and retail sales points to solid September quarter GDP growth. That said the mixed nature of recent readings on the Australian economy generally points to the RBA leaving interest rates on hold at record lows well into next year.

Shane Oliver, AMP Capital

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