(Bloomberg) — Australia is on track for its steepest tightening of monetary policy in a generation, raising the risk of an economic slowdown as the housing market shifts into reverse and consumers pull back on spending.
The Reserve Bank of Australia will lift its key interest rate by 50 basis points for a third consecutive month on Tuesday to 1.85%, according to all but one of 23 economists surveyed. That will take its combined tightening since May to 175 basis-points, the biggest increase inside six months since 1994.
“The RBA is behind the pack,” said Andrew Ticehurst, senior economist and rates strategist at Nomura Holdings Inc. The current cash rate is “not appropriate for an economy with an unemployment rate at around a 50-year low and with core inflation running at a 6% annualized pace.”
Ticehurst sees the cash rate at 3.35% by year’s end while money markets are pricing in about 3%. Such a sharp pace of tightening will ratchet up loan repayments and weigh on consumption, which accounts for about 60% of economic output.
Policy makers are trying to rein in inflation that’s running at more than twice the upper end of the RBA’s 2-3% target. They maintain households can cope with further hikes because they built up savings during the pandemic and 3.5% unemployment means most Australians have incomes to meet their obligations.
RBA rate increases flow through quickly to borrowers as most are on variable-rate loans. Figures last week showed early signs of cooling demand with retail sales in June rising at the weakest pace this year.
Commonwealth Bank of Australia internal data, which captures spending on credit and debit cards at the nation’s largest lender, showed a “clear easing” in consumption in July.
“There is a clear risk that the volume of household consumption falls by late-2022,” according to Gareth Aird, head of Australia economics at CBA. “We expect forward-looking indicators of the economy to slow sharply.”
Sliding house prices, which are directly linked to perceptions of wealth, are already weighing on consumer confidence. Real estate firm PropTrack expects prices to fall 15% from current levels in 2023, after climbing at an “exceptional pace” over the past two years.
That’s one reason Nomura, CBA, AMP Capital Markets and UBS Group AG predict rate cuts will come as early as next year.
The RBA will publish its quarterly update of forecasts on Friday that’s widely expected to show downgrades to economic growth and employment and a sharp increase in the inflation outlook — in line with Treasury’s outlook last week.
The RBA doesn’t release its own projections for interest rates.
“We expect the labor market to start easing gradually later in 2023,” Felicity Emmett and Catherine Birch, senior economists at Australia & New Zealand Banking Group Ltd., said in a research note. “This will add to the case for the RBA to cut rates” in mid-2024.
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets also climbed higher.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
This report by The Canadian Press was first published Sept. 13, 2024.
OTTAWA – Statistics Canada says wholesale sales, excluding petroleum, petroleum products, and other hydrocarbons and excluding oilseed and grain, rose 0.4 per cent to $82.7 billion in July.
The increase came as sales in the miscellaneous subsector gained three per cent to reach $10.5 billion in July, helped by strength in the agriculture supplies industry group, which rose 9.2 per cent.
The food, beverage and tobacco subsector added 1.7 per cent to total $15 billion in July.
The personal and household goods subsector fell 2.5 per cent to $12.1 billion.
In volume terms, overall wholesale sales rose 0.5 per cent in July.
Statistics Canada started including oilseed and grain as well as the petroleum and petroleum products subsector as part of wholesale trade last year, but is excluding the data from monthly analysis until there is enough historical data.
This report by The Canadian Press was first published Sept. 13, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in the base metal and energy sectors, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 172.18 points at 23,383.35.
In New York, the Dow Jones industrial average was down 34.99 points at 40,826.72. The S&P 500 index was up 10.56 points at 5,564.69, while the Nasdaq composite was up 74.84 points at 17,470.37.
The Canadian dollar traded for 73.55 cents US compared with 73.59 cents US on Wednesday.
The October crude oil contract was up $2.00 at US$69.31 per barrel and the October natural gas contract was up five cents at US$2.32 per mmBTU.
The December gold contract was up US$40.00 at US$2,582.40 an ounce and the December copper contract was up six cents at US$4.20 a pound.
This report by The Canadian Press was first published Sept. 12, 2024.
