Rate rise almost a question of when
The Reserve Bank this week left interest rates on hold for July as expected, but August is another matter and data on jobs and inflation out over the next few weeks are key to whether we are in for a rate rise as soon as next month.
The RBA has already predicted that inflation is likely to rise again from the quite contained levels of early 2007. Given the economy has bounced back strongly this year and the world economy is also on the up, it seems a matter of time before inflationary pressures re-appear.
At the first evidence, the RBA will want to act to pre-empt any inflation breakout later in 2007 or 2008. With quarterly inflation figures next out in late July, that could come as early as next month, or perhaps later in the year – which might prove trickier for the RBA, coinciding with election time.
The latest retail trade and building approvals figures showed dips in May. Although the monthly figures often bounce around for both these measures, they may suggest that overall economic performance is not quite as robust as we thought.
Two successive monthly falls in retail growth suggest that consumer spending may be levelling off after being unambiguously upward in the previous twelve months. You wouldn't think so given how strong consumer confidence and the jobs market have been. It may be temporary seasonal factors at play but perhaps higher petrol prices and talk of higher interest rates have taken some toll.
Building approvals, looking like they might have turned the corner a couple of months back, now look to be as flat as ever. House and apartment approvals both fell in May to be 3.4 per cent and 16 per cent down on a year ago respectively.