Economic Data Roundup: Australia

How are things going in the Land Down Under? In this edition of my Economic Data Roundup, I’ll be looking at the latest economic releases from Australia and what these could mean for the Aussie’s forex price action.

Employment

Fresh off the press today is the Australian jobs report for August, which printed better than expected results. Hiring picked up by a whopping 121K during the month, higher than the projected 15.2K rebound and enough to bring the jobless rate down from 6.4% to 6.1%. To top it off, the participation rate actually improved from 64.9% to 65.0% in August, indicating that Australians returned to the labor force to look for full-time work.

A closer look at the components of the labor report reveals that most of the gains were spurred by a 106.7K jump in part-time hiring while full-time employment rose by only 14.3K. Aside from that, the July employment change reading was downgraded to show a 4.1K drop in hiring from the initially reported 0.3K decline.

Leading indicators are a tad more hopeful, as the ANZ job advertisements report showed a 1.5% jump for August and upgraded figure for July. This could be a sign that labor demand is picking up and that full-time hiring may be in for a stronger rebound soon.

Growth

australian dollar appreciationA few days ago, Australia released a stronger than expected GDP reading for Q2, showing that the economy expanded by 0.5% versus the 0.4% growth estimate. Bear in mind though that this is less than half the pace of growth logged in for the previous quarter, which chalked up a 1.1% GDP reading.

A quick review of past GDP releases would show that the mining sector is no longer contributing as much as it used to, as falling prices of iron ore resulted to lower manufacturing and export revenues. RBA policymakers have acknowledged this and are blaming it partly on the Aussie’s “historically high” value, reiterating that they’d like to see a pickup in non-mining components of the economy.

Consumer Spending

It’s a mixed bag when it comes to the consumer sector though, as spending has more or less stabilized while sentiment remained weak. The latest retail sales release printed a 0.4% uptick as expected, slower compared to the previous 0.6% gain.

Meanwhile, the Westpac consumer sentiment report appears to be hinting at another downturn in spending, as the September release showed a -4.6% reading. Components of the survey indicated that respondents had become increasingly concerned about higher taxation, weaker economic conditions, and a shaky jobs market. This decline in financial confidence might lead Australians to keep their hands in their pockets instead of spending their hard-earned cash.

To sum it up, even though a few green shoots can be seen, it looks like Australia ain’t out of the woods just yet! As RBA Governor Stevens mentioned during the central bank’s latest rate statement, the economy might continue to see below trend growth in the coming months and that China’s economic performance might be crucial to Australia’s growth prospects.

Do you think the Australian dollar is in for more weakness until the end of this year? I’m looking forward to reading about your thoughts on this!