• Council approvals to build news homes fell by 7.4 per cent in February after sliding by a revised 11.6 per cent in the prior month. In annual terms approvals are down 21.8 per cent on a year ago.
• The floods continue to play a part in the weak result, but even excluding Queensland new dwelling approvals fell by a considerable 6.6 per cent in February.
• Retail spending grew by 0.5 per cent in February – in line with the Commonwealth Bank Business Sales Indicator which was released two weeks ago. Over the past year retail trade lifted by just 3.6 per cent.
• Across the states Queensland retailers outperformed their peers with sales up 2.3 per cent in February.
• Private sector credit rose by 0.5 per cent in February to stand 3.4 per cent higher than a year ago. Housing credit grew by 7 per cent in annual terms marking the weakest annual growth rate in records going back 34 years.

What does it all mean?

• The weakness in housing activity is here to stay – at least for the near term. After sliding by almost 12 per cent in January, approvals have slumped by a further 7 per cent in February. In fact in annualised terms approvals are now down over 24 per cent on a year ago. Whichever way you cut it the weakness in housing activity is plain to see.
• There is no doubt that the wet weather and in particular the floods in Queensland have had a serious detrimental impact to activity levels. Especially given that Queensland approvals have fallen by over 20 per cent in the past two months, but even when Queensland is excluded, approvals fell by a sizeable 6.6 per cent in February.
• The building approvals series tends to be volatile especially given that apartment approvals, tend to be lumpy. And it is important to note that the figures are likely to be revised in coming months, given the flooding. Despite the possibility of revisions to the data, it is clear that there is an underlying level of weakness in housing activity. Not only is overall building approvals plummeting but the all important private sector new house segment remains weak, with a 17 per cent slide in the annual growth rate.

• The retail sector has certainly done it tough over the past year. Annualised growth in sales is still subdued at just 3.6 per cent – a far cry from the decade average growth of 6 per cent. The tightening of monetary policy and unwinding of stimulus has been the key reason for the turnaround in the fortunes of the retail sector. The domestic economy is not shooting the lights out and retail activity is sluggish.
• The larger department and chain stores have fared better, given the ability to discount to a greater degree. In annual terms sales are up 4.5 per cent at the larger retailers while smaller retailers recorded growth of just 2 per cent. On a positive note Queensland retailers outperformed their peers in the month of February with sales up 2.3 per cent. It may be an early sign of the rebuilding that should gain traction in coming months.
• Part of the sustained weakness in the retail sales data can be blamed on lower prices, rather than weaker spending, given the widespread discounting taking place across the retail sector. However weaker volumes are clearly playing their part. Prices of some goods are coming down because our dollar is strong, but plenty of
  retailers are cutting prices because consumers refuse to spend.
• The Australian economy has certainly lost momentum over the last couple of months. Not only are house prices going backwards, but retail spending is barely growing. And even the latest improvement in private sector credit comes after considerable period of weakness. The pickup in business credit is encourage but follows seven months of going backwards. Further improvements would be needed in coming months to claim a full blown turnaround.

What do the figures show?

Retail trade:

• Retail trade rose by 0.5 per cent in February after a 0.4 per cent rise in January. Non-food retailing rose by 0.9 per cent in February after fall by 1.1 per cent rise in the prior month. Over the past year retail trade lifted by just 3.6 per cent.
• Sales by chain stores and other large retailers rose by 0.5 per cent in seasonally terms in February while sales by smaller retailers rose by 0.6 per cent. In annual terms sales at chain stores were up 4.5 per cent on a year. Sales at smaller retailers were up just 2.0 per cent on a year ago.
• During February, sales increased most at other Furniture, floor coverings, houseware and textile goods retailing (up 4.3 per cent). Other retailing groups like newsagencies, stationary shops and florists recorded healthy gains up 3.1 per cent in the month. Sales fell most at other recreational good retailers – including sporting, entertainment and toy retailers – (down 2.2 per cent), followed by footwear retailers (down 1.1 per cent).
• Across the states sales lifted most in Queensland (up 2.3 per cent), followed by Northern Territory (up 1.7 per cent), Western Australia (1.6 per cent), and Tasmania (up 1.3 per cent). Sales fell in the ACT (down 1.6 per cent), South Australia (down 0.5 per cent and Victoria (down 0.3 per cent).

Building Approvals:

• New dwelling approvals fell by 7.4 per cent in February, after sliding by a downwardly revised 11.6 per cent in January. Dwelling approvals are down 21.8 per cent on levels of a year ago.
• Excluding Queensland new dwelling approvals fell by 6.6 per cent in February.
• House approvals rose by 0.5 per cent in February (private sector up 0.2 per cent), after sliding by 2.8 per cent in January. Apartment approvals fell by 20.5 per cent in February (private sector was down 20.0 per cent) after sliding by 23.3 per cent in January. In annual terms apartment approvals are down 26.1 per cent on a year ago, while house approvals are down 19.5 per cent.

• Dwelling approvals fell in three of the six states in January, with Victoria (down 23.1 per cent) faring worst followed by Queensland (down 11.8 per cent). Approvals rose the most in Tasmania (up 44.4 per cent) and South Australia (up 35.9 per cent).
• In annual terms approvals across the state: NSW (down 10.4 per cent), Victoria (down 17.6 per cent), Queensland (down 38.7 per cent), South Australia (down 2.4 per cent), Western Australia (down 38.6 per cent), and Tasmania (up 1.2 per cent).
• The value of building approvals rose by 13.7 per cent in February and was lower by 9.5 per cent on a year ago.

Private sector credit

• Private sector credit (lending) rose by 0.5 per cent in February after rising by 0.3 per cent in January. Credit growth is up 3.4 per cent on a year ago.
• Housing credit grew by 0.5 per cent with lending to owner-occupiers rising by 0.6 per cent and investor housing up 0.4 per cent. Housing credit is up 7.0 per cent on a year ago – the weakest annual growth in 20 months. Owner occupier housing credit is up 6.8 per cent on a year ago – slowest pace in records going back 20 years. Investor housing lending was up 7.5 per cent on a year ago.
• Personal credit remained rose by 0.2 per cent in February after rising by 0.1 per cent in January. Personal credit was up 0.7 per cent over the year – still well below the rate of inflation. Business credit rose by 0.6 per cent after sliding for seven straight months. Business credit is down 1.7 per cent on a year ago and has been consistently contracting for the past 20 months.

What is the importance of the economic data?

• The Bureau of Statistics’ monthly Building Approvals release contains figures on local council approvals to build residential structures such as homes and units as well as commercial premises such as offices and shops. Approval is one of the first stages of the construction ‘pipeline’ and is thus a key leading indicator of future activity. An increase in approvals would point to stronger future activity for construction-related companies.
• The Bureau of Statistics’ Retail trade publication contains the most current readings on the performance of consumer spending. The ABS surveys 500 ‘larger businesses’ and 2,750 ‘smaller businesses’. Retail trade covers spending at a broad range of retail outlets but excludes both petrol and motor vehicle sales. A weak retail trade result may point to a slowing economy as well weighing on the share prices of listed retail stocks. But retail trade estimates can’t be assessed in isolation – it is important to look at the influences determining future trends in consumer spending, such as income, employment and confidence levels.
• Private sector credit figures are released by the Reserve Bank on the last working day of the month. Credit is separated into three categories – housing, other personal and business. Private sector credit is effectively the amount of loans outstanding in the economy. If growth in lending is strong then it suggests that credit from financial institutions is freely available, underlying demand for assets such as cars and houses is firm and that the price of credit (interest rates) is attractive.

What are the implications for interest rates and investors?

• The domestic economy is certainly facing headwinds, with the higher Australian dollar curbing tourism and making exports less competitive. At the same time the conservative attitudes of consumers have ensured that retail activity remains relatively weak, while activity in the housing sector remains sluggish.
• More and more it is looking like the Reserve Bank will stay on hold on the interest rate front over the next couple of months. There is nothing in the data to force the Reserve Bank to once again look at rate hikes in the near term.

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• Australian dwelling starts fell by 5.3 per cent in the December quarter. The side in dwelling starts was due to weakness in activity in both the private and public sector.
• Private sector commencements were weaker by 4.1 per cent in the quarter with house starts down 8.0 per cent and apartment starts up 4.2 per cent.
• In 2010, 168,285 dwellings were started, up 10.6 per cent on the decade average and up 8.5 per cent on the 5-year average.
• In the December quarter, starts fell in all but one of the eight states and territories. Starts are at record highs in the ACT – a stunning 83.3pct higher than decade averages. The main risk is that the ACT market will experience indigestion later this year.

What does it all mean?

• It’s clear that towards the end of 2010 housing activity dropped off, with dwelling commencement sliding by over 18 per cent in the second half of the year. However the slide in activity levels comes after a serious ramp up in building. In fact when you look at the whole year almost a 170,000 dwelling were started up 10.6 per cent on the decade average.
• Interestingly in the December quarter, starts fell in all but one of the eight states and territories However only Queensland has dwelling commencements that are below 5-year or decade averages. And only NSW has dwelling commencements below decade averages so suggestions of substantial under-building in Australia are wide of the mark.
• At present the increased supply of homes in the market, together with the softening of demand in response to higher interest rates is leading to more balanced conditions and more sustainable growth of home prices. CommSec expects Australian home prices to grow by 5 per cent over 2011.
• Looking forward it is likely that activity in the housing sector will continue to moderate. The rate hikes have robbed the housing sector of momentum, and with construction loans at two year lows it is unlikely that new building will be buoyant in the near term.

What do the figures show?

Dwelling commencements

• The number of dwelling commencements fell by 5.3 per cent in the December quarter after sliding by 13 per cent in the September quarter. Private sector commencements were weaker by 4.1 per cent in the quarter with house starts down 8.0per cent and apartment starts up 4.2 per cent.
• In the December quarter, starts fell in all but one of the eight states and territories. Leading the gains was the ACT (up 75.0 per cent). Starts fell most in the Northern Territory (down 37.3 per cent), followed by Victoria (down 15.9 per cent), Tasmania (down 14.4 per cent), South Australia (down 14.1 per cent) and Queensland (down 5.9 per cent), NSW (down 2.1 per cent), and Western Australia (down 0.6 per cent).
• Starts are at record highs in the ACT – a stunning 83.3pct higher than decade averages. The main risk is that the ACT market will experience indigestion later this year.
• In 2010, 168,285 dwellings were started, up 10.6 per cent on the decade average and up 8.5 per cent on the 5-year average.

What is the importance of the economic data?

• The ABS figures on dwelling commencements are compiled on the basis of returns collected from builders and other individuals and organisations engaged in building activity. The data is useful in highlighting activity levels in residential construction.

What are the implications for interest rates and investors?

• The longer term fundamental for property look attractive. The Reserve Bank is unlikely to embark on significant rate hikes, population growth remains strong, and rental vacancy rates continue to fall. The tightness in the labour market is also likely to drive up skilled migration over the coming year adding to the demand for homes.
• It is looking likely that the Reserve Bank will remain on the interest rate sidelines over the next couple of months. Confidence is clearly paramount to the recovery cementing itself. Even the economic data has been patchy in recent times, while the impact of the natural disasters both domestically and globally is still filtering through the economy.

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• Over the three months to February, employment across Australia grew by just 0.1 per cent or 16,200 – marking the slowest pace of jobs growth in 18 months.
• The weakness in housing activity resulted in the construction sector shedding 30,600 jobs in the three months to February – marking the biggest fall in 8 years. Almost all construction jobs lost were in NSW. Overall the data shows a much more mixed picture of the job market with 8 of 19 industry sectors having less jobs than three months ago.
• Across the states NSW (+26,700) led the job gains in the three months to February, followed by Victoria (+22,200). The bulk of the job losses occurred in Queensland (-39,400), and Western Australia (-14,600).
• Domestic airfares generally rose in March with business fares up 4.8 per cent, full economy fares up 0.3 per cent and restricted economy fares up 1.4 per cent.
• The discount airfare index rose by 0.9 per cent in March, easing further away from the record lows reached in January.

What do the figures show and what does it all mean?

• There is a perception that the jobs growth continues to be robust. However the latest round of quarterly labour data has clearly highlighted that employment growth is slowing. In fact over the three months to February employment grew by just 0.1 per cent, marking the slowest pace of jobs growth in 18 months. At this stage the slowdown in new labour hiring is not overly concerning especially given the strength in employment throughout 2010. However the slower pace of hiring is yet another sign that the domestic economy has lost some momentum.
• Across the sectors, the construction sector bore the brunt of the job losses with most of the weakness centred on NSW. In fact Jobs growth in the construction sector fell by over 30,000, marking the biggest fall in eight years. There is no doubt that the weakness in housing activity and slowdown in overall new building has played a significant part in slide in construction jobs. And looking forward the outlook is likely to remain weak – especially given that loans to build new homes (a timely forward looking indicator) is at the lowest levels in two years.

• Interestingly there may be more of us with jobs, but we are working far fewer hours. In fact the latest reading is just shy of record lows. On average over the past year Australians worked on average 34 hours a week. That is around 90 minutes less than a decade ago.
• The figures go a long way in explaining Australia’s poor productivity. More of us have jobs but on average we are working fewer hours. In part there are more part time workers but also more married women and seniors in the workforce on flexible hours.
• Just like anything else, when it comes to airfares it pays to shop around. According to the Government’s monitoring group, BITRE, all classes of airfares are now rising.
• Discount airfares hit rock bottom in January, and have since recorded modest gains. Interestingly the increase in prices is more a function of the increase in fuel surcharges that have taken place over the last couple of months rather than a change in consumer behaviour. The BITRE notes that fares include all taxes and charges, i.e. they reflect actual total price payable by passengers for a particular journey.
• Interestingly the gains in discount airfares have been more modest when compared with the price rise in business and full economy fares. Business class fares rose by a sizeable 4.8 per cent in March compared with discount fares which were up just 0.9 per cent in the month. Even full economy fares are now almost 6 per cent higher than a year ago while discount fares are still down 13 per cent in annual terms. Clearly the advice to shop around doesn’t just go for consumers, but also companies
• With the cost of jet fuel on the rise and upward pressure on wage costs, airlines will continue to attempt to lift fares to cover costs. At the same time airlines are testing the waters – lifting some airfares and seeing what the response is. Any smart business operator will clearly be shopping around for the best deal and trying to avoid any slug in travel costs. As to how successful they will be remains to be seen. Certainly other businesses are facing a lot of difficulties in trying to raise prices in the current environment.

What do the figures show?

Labour Industry Data

• Over the three months to February, employment across Australia grew by 16,200 or 0.1 per cent – well below the 10-year average job growth of 57,000.
• Professional, Scientific and Technical Services led the the job gains, with employment lifting by 37,300. Next strongest was Accommodation and Food Services up 44,000, with Accomodation & food service up 25,100.
• At the other end of the scale, Agriculture, Forestry and Fishing down by 39,200 in the past three months with Construction down 30,600.

• Over the past year employment has grown by 306,000 jobs or 2.8 per cent. .
• Over the year to February, Healthcare and Social Assistance (up 91,500) led the job gains, followed by Accommodation and Food Services (up 58,000) and Retail Trade (up 49,300).
• The biggest industry sector – heath care and social assistance – has been a consistent job creator over the past two years with employment only dropping once in the period. And the 91,500 jobs created over the past year was the third best result in records going back 25 years.
• Employment in the mining sector has grown sharply over the past year. Total mining employment rose by 2 per cent over the three months to February and a staggering 15.6 per cent over the year. Similarly annual growth in Electricity, Gas & Water rose by 13.6 per cent over the past year.
• Across the states in original terms NSW (+26,700) led the job gains in the three months to February, followed by Victoria (+22,200), Northern Territory (1,100) and Tasmania (700). Job losses occurred in Queensland (-39,400), followed by Western Australia (-14,600), ACT (-3,200), and South Australia (-300).

Domestic airfares:

• According to the Bureau of Infrastructure, Transport and Regional Economics, the discount airfare index rose from 64.2 to 64.8 in March (July 2003=100). In January 2011 discount airfares hit record lows of 59.4. While the index is volatile on a monthly basis, it is notable that the index has been in operation for 18 years.
• The smoothed (13-month average) index of discount airfares stood at 64.6 in March, down 6.1 per cent on a year ago. Discount airfares have been consistently falling in annual terms for over three years.
• While discount fares are falling in annual terms, business class fares are rising. The index of business class fares rose by 4.8 per cent in March. And business class fares are 3.3 per cent higher than a year ago.
• The index of full-economy fares rose by 0.3 per cent in March. Full economy airfares are up 5.7 per cent on a year ago.
• The index of restricted-economy airfares rose by 1.4 per cent in March, the tenth increase in eleven months. Restricted economy fares are up 3.6 per cent on a year ago – the fastest pace of growth in two years.

What is the importance of the economic data?

• Detailed Labour Force estimates are released the Bureau of Statistics each month with quarterly industry estimates published each quarter. The data assists in highlighting the industries which are expanding and contracting, thus providing additional insights into the current performance of the economy.
• The Bureau of Infrastructure, Transport and Regional Economics (BITRE) release data on airfares on a monthly basis. The figures are useful in getting a gauge on airline profitability. The data is also useful in monitoring consumer spending trends.

What are the implications for interest rates and investors?

• At present the Reserve Bank would not be overly concerned by the slowdown in jobs growth. In fact the central bank has also been anticipating a softening of conditions in the labour market for some months – in line with the weak growth forecasts for the first half of 2011.
• Looking forward the Reserve Bank expects the unemployment rate to only slide by 0.5 per cent over the coming two years. No doubt in the longer term an improvement in productivity and a pickup in skilled migration is what is needed to ensure that these forecasts are met. The
  jobs data gives the Reserve Bank further reason to stay on the interest rate sidelines added to which a sustained slowdown in jobs growth should ensure that wage growth doesn’t spiral out of control in the midterm.
• The latest data on airfares highlights the pressures that Corporate Australia is facing at present. Businesses will make every effort to push up prices and recoup costs. But they need to be mindful about the backlash on sales and market share. If consumers quickly shift affections when prices go up, businesses must be quick to review or reverse their decisions.

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