Trendline Your weekly update of the latest economic trends 27 March 2015 Western Australia’s population growth slows, but still fastest in the nation Australian demographic statistics were released by the ABS on Thursday, and showed that Western Australia’s population growth rate has continued to slow but remains the highest of all Australian states and territories. In the September quarter of 2014, WA’s population grew at an annual rate of 2.1 per cent. Whilst this is the lowest growth rate in nine years and significantly lower than the 3.7 per cent experienced three years ago, population growth in WA did not continue the sharp downward trend reported in recent releases and may have stabilised at around the two per cent mark. The largest contributor to this stabilisation was a strong, unexpected increase in net overseas migration, which totalled 10,911 in the September quarter. This represents the first quarter-on-quarter increase in net overseas migrations since September 2013, and was almost four times the number recorded in June. Meanwhile, net interstate migration was negative on the quarter, with a net 176 people moving out of the state in September. This marked the first time WA had recorded two consecutive quarters of negative interstate migration since 2003. The natural increase in WA’s population remained steady at around 5,000 on the quarter. With these results, the total population in WA now stands at approximately 2.59 million. In other Australian states and territories the most notable result was in Queensland, which reported its lowest population growth rate in 15 years at just 1.5 per cent. The slowdown was largely the result of only 1,544 people moving to Queensland from interstate over the quarter, which is well down on the Queensland average over the past decade of 3,756 people per quarter. Australia as a whole reported annual population growth of 1.5 per cent in the September quarter, with its total population now reaching approximately 23.6 million. Chinese growth fears and iron ore price woes The iron ore market has been in the news again this week, with a number of events and data releases stoking concerns that the market may not have yet found a bottom. Fears around a Chinese slow down have been reinforced with the preliminary HSBC China Manufacturing Purchasing Managers Index (or flash PMI), an indicator of factory activity, hitting an 11 month low. The PMI fell to 49.2 in March compared with 50.7 in February. This is the second time this year the index has fallen below 50, with a reading below 50 deemed a contraction. The price of the steel making commodity has itself continued to fall, with the benchmark spot price falling under US$55 per tonne this week. There is no positive outlook in the short term, with sea borne supply continuing to ramp up from major producers, and demand from China waning. An index of iron ore exports from Port Hedland charted against iron ore inventory held at Chinese ports is illustrative of the mismatch in supply and demand in the current market, with large growth in exports and historically high inventory levels at ports. The outpacing of exports to inventory at ports started around the end of 2012, where the price dropped to around US$87 per tonne. This trend has persisted leading to the price levels seen today. Analysts, such as Morgan Stanley, have further downgraded their forecasts of the commodity. Morgan Stanley has reduced their iron ore price forecast for 2015 by 28 per cent, to just US$57 per tonne. Meanwhile, Citibank now expects prices to drop below the US$50 per tonne level. This time last year both firms were predicting triple digit prices. Towards the end of the week, founder of Fortescue Metals Group, Andrew Forrest, has suggested a has suggested a cap on iron ore production in Western Australia in a bid to reverse the dramatic slide in the price of the commodity – in a sign of just how far the market has evolved in the past 12 months. Iron Ore Supply Index Port Hedland Export Vs Chinese Ports Stockpiles, Base = 2010 Iron Ore Supply Index Port Hedland Export Vs Chinese Ports Stockpiles, Base = 2010 260 260 Port Hedland Exports 220 220 Chinese Ports Stockpiles 180 180 140 140 100 100 60 Feb-2011 Source: Bloomberg Feb-2012 Feb-2013 Feb-2014 60 Feb-2015 Data wrap-up 25/03/15 WA & Australia, 000s Department of Employment Job Vacancies WA & Australia, 000s 35k US New home sales data was released by the US Census Bureau on Wednesday, and showed that the number of new homes sold in in February increased by 7.8 per cent from the previous month to reach a seasonally adjusted annual rate of 539,000 sales. With the strong increase, the annualised rate now sits at its highest levels since February 2008 – before the collapse of Lehman Brothers precipitated the Global Financial Crisis. February’s figures were largely unexpected as economists previously predicting an annual rate of 464,000 sales. The strong result indicates that positive job figures are starting to have an effect on the US housing market, with US consumers taking advantage of the record low mortgage rates on offer. Australia (RHS) 300k 25k 250k 20k 200k 15k 150k 10k Feb 10 Feb 11 Feb 12 Feb 13 100k Feb 15 Feb 14 Source: DEEWR The February Consumer Price Index for the United Kingdom was unchanged on the year. A year-on-year change of 0.0 per cent is the lowest rate recorded in the UK since records began in 1989. The previous low was seen in January with year-on-year growth of 0.3 per cent. The UK Office for National Statistics reported the largest detractor from the Index for February was a decline in the price of recreational goods, food and furniture and furnishings. Furthermore, there were no large increases in prices to offset the declines. Despite February’s decline, core CPI (CPI minus food and energy prices) increased 1.2 per cent year-on-year. However, this was below the consensus of 1.3 per cent year-on-year growth. There are growing deflationary concerns in the UK, analysts have estimated CPI will dip below zero in the coming months and hover around zero for the remainder of 2015. United Kingdom Consumer Price Index Annual Percentage Change, Base = 2005 United Kingdom Consumer Price Index Annual Percentage Change, Base = 2005 6 6 Core CPI (YoY) CPI (YoY) 4 4 2 2 0 Feb 05 Feb 07 Feb 09 Feb 11 0 Feb 15 Feb 13 Source: Bloomberg United States Consumer Price Index Annual Percentage Change, Base = 1982-84 United States Consumer Price Index Annual Percentage Change, Base = 1982-84 6% Core CPI (YoY) 5% 6% CPI (YoY) 5% 4% 4% 3% 3% 2% 2% 1% 1% 0% % -1% Hundreds The United States Bureau of Labour Statistics has reported consumer prices in the US were also unchanged on the year. In February, CPI was unchanged year-on-year at 0.0 per cent, which was above the consensus of a 0.1 per cent decline in prices. Energy prices were the largest detractor on the Index, declining 18.8 per cent year-on-year. However, core CPI increased 1.7 per cent year-on-year and was above the markets estimate of 1.6 per cent. Low growth levels in consumer prices would be of concern for the Federal Reserve as they near their first interest rate hike since the GFC in 2008. However, the extent to which headline inflation is being affected by recent declines in global oil prices may become clearer in the coming months. 350k WA (LHS) 30k -1% -2% -2% -3% Feb 05 Feb 07 Feb 09 Feb 11 Feb 13 -3% Feb 15 Source: Bloomberg US New Home Sales Annualised US New Home SalesSales of New Dwellings, Thousands Annualised Sales of New Dwellings, Thousands 650k 650k 600k 600k 550k 550k 500k 500k 450k 450k 400k 400k 350k 350k 300k 300k 250k 200k Feb 08 250k Feb 09 Feb 10 Feb 11 Feb 12 Feb 13 Feb 14 200k Feb 15 Source: Bloomberg The week ahead 30/03/15 The start of the week sees Japan release industrial production figures and a number of European countries release consumer confidence results. 31/03/15 The first domestic release of the week comes on Tuesday with the ABS’ regional population growth report. The HIA new home sales data for February will also be released. Globally, euro area CPI, unemployment and United States consumer confidence figures will be released. 01/04/15 The first day of April will see the ABS release building permit statistics, which have in recent times suggested Australia’s home building boom may be approaching its peak. 02/04/15 Domestically, export and import figures are slated for release on Thursday, and are the major release of the week. 03/04/15 In Australia, Friday is a public holiday for Good Friday. US economic data doesn’t take time off, though, with the US non-farm payrolls and related labour market statistics to be released in the evening. Produced by CCI Economics The Chamber of Commerce and Industry of Western Australia (Inc) 180 Hay Street, East Perth WA 6004 Telephone (08) 9365 7555 Facsimile (08) 9365 7550 Email: [email protected] Thousands 24/03/15 Department of Employment Job Vacancies Hundreds 24/03/15 Monthly job vacancy figures were released by the Department of Employment on Tuesday and showed that WA vacancies decreased by 4.5 per cent in February to reach 16,419. This was the weakest result in the nation, with declines also reported in Queensland (3.9 per cent) and increases reported in Tasmania (five per cent), the Northern Territory (4.2 per cent) and Victoria (0.7 per cent). Vacancies in Australia as a whole decreased 1.1 per cent in February and now stand at 157,238. In terms of year-on-year growth, job vacancies in WA have fallen by 3.7 per cent, which is significantly lower than the 6.9 per cent increase recorded nationally. The main attributers to the WA yearly decline were decreased vacancies reported for machinery operators and drivers (15.6 per cent), technicians and trade workers (8.3 per cent) and managers (5.2 per cent), whilst community and personal service workers (18.1 per cent) and labourers (11.3 per cent) reported the largest increases in WA job vacancies. Thousands 24/03/15
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