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Daily Market Digest: RBA meeting minutes. German PPI falls

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Market Summary

  • RBA meeting minutes show rates to be held steady in the short term
  • Australia House Prices Rise 2.0% in Q2
  • US housing starts and building permits fall more than expected

Today’s Economic events

  • RBA monetary policy minutes released
  • Australia HPI q/q 2.0% vs. 3.10%
  • Swiss trade balance 3.02bn vs. 3.27bn
  • Germany PPI m/m -0.10% vs. 0.10%
  • US building permits 1.139mn vs. 1.164mn
  • US housing starts 1.142mn vs. 1.119mn

Coming Up

  • (CAD) BoC Gov. Poloz Speech
  • (NZD) Visitor arrivals

RBA meeting minutes shows stable interest rate outlook

The meeting minutes from the RBA’s September meeting was released today. The report showed that interest rates would remain on hold in the foreseeable future with the RBA noting that growth is likely to remain in line with expectations. The RBA left interest rates unchanged at 1.50% at its meeting earlier in September.

“Taking into account the recent data, and having eased monetary policy at its May and August meetings, the Board judged the current stance of monetary policy was consistent with sustainable growth in the Australian economy and achieving the inflation target over time,” the minutes showed despite flagging concerns on declining business investment in the quarter ending June.

On inflation, the RBA had undertaken two rate cuts earlier this year in May and August which followed weak inflation figures in the first two-quarters of the year. The RBA’s inflation target was between 2% and 3%.

On housing market, the RBA said that weak conditions persisted in the housing sector compared to a year ago, noting that auctions had declined while the value of housing loan approvals was broadly unchanged. Housing credit growth was also seen to be trending lower.

“Housing prices had risen modestly over the past year and turnover had been below average,” the minutes showed.

In a separate report, Australia’s Home Price Index for the second quarter rose 2.0%, which was lower than the forecasts of 3.10%. Still, the second quarter HPI was better after reversing the 0.20% declines in the previous quarter.

Australia HPI q/q (Q2, 2016): 2.0% (Prev.: -0.20%)
Australia HPI q/q (Q2, 2016): 2.0% (Prev.: -0.20%)

Paul Dales, an economist at Capital Economics, said, “The RBA has not changed its view since cutting rates to 1.5 percent in August, which implies it sees little need to cut interest rates again. Although the strong defence of its view that the housing market has softened implies that housing is not a barrier to further cuts.”

German producer prices drop in August

The price of goods leaving the factory gates in August slipped as expected in Germany. Official data from statistics agency, Destatis showed that producer prices fell 0.10% in August on a month over month basis, while sliding 1.60% compared to a year ago. The pace of decline was better, compared to July’s year over year decline of 2.0%.

Germany PPI YoY (August’2016): -1.60% (Prev.:-2.0%)
Germany PPI YoY (August’2016): -1.60% (Prev.:-2.0%)

The headline print was broadly in line with market expectations, led by weaker energy prices. Destatis said that energy prices fell 5.50% on a year over year basis while the price of intermediate goods fell 1.60%. Non-durable consumer goods rose 0.70% while the price of capital goods increased 0.60%. Excluding energy, producer prices fell 0.30% compared to a year ago while coming out unchanged on a month over month basis.

US housing permits and starts fall more than expected

US builders saw fewer permits and housing starts were weaker than expected in August. Official data from the commerce department said that building permits for privately owned housing units fell 0.40% in August from a month ago, to a seasonally adjusted annual level of 1.139 million. Housing starts were down 5.80% from a month ago to an annual rate of 1.142 million. Analysts were expected to see an increase of 1.80% on building permits while expecting a 1.70% decline in housing starts.

US Building permits (August 2016): 1.14M (Prev.:1.14M)
US Building permits (August 2016): 1.139M n(Prev.:1.144Mn)

Housing starts for single-family dwellings fell 6.0% while permits for single-family homes rose 3.70% from the previous month, which was the largest gain since June 2014.

July’s data was also revised lower to show building permits revised down to show a 0.80% decline while housing starts were revised down to 1.40%.

On a year over year basis, building permits are down 0.80% with single family permits alone rising 8.40%. Housing starts gained 6.10% on the year over year basis in August with single-family starts up 9.10% during the period.

The report comes following Monday’s data from the National Association of Home Builders survey. The data showed that builders were confident about the single family market. Robert Dietz from NAHB said, “With the inventory of new and existing homes remaining tight, builders are confident that if they can build more homes they can sell them.”

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