The week that was
There was a little more good news on the economy with a further lift in retail spending in May. In the last two months, retail turnover has risen by 1.0 per cent and 0.6 per cent, respectively, which is a welcome recovery from the falls in spending in the first quarter of the year.
These back-to-back increases have surprised most economists with weak wages growth acting as a handbrake on spending. Rather than relying on rising wages to fund higher spending, it appears that consumers have resorted to extra debt and lower savings to support their spending habits. The other good news is that this spending pick-up will feed directly into the June quarter GDP (data not released till early September) which should be a substantially better result than the weak 0.3 per cent growth rate registered in the March quarter.
The week ahead
With all eyes on housing, as always it seems, the housing finance data next week will provide the update on demand for borrowing for both investors and owner-occupiers, the average loan size and the extent first home buyers are participating in the housing market.
In recent times, there is tentative evidence that the housing market is cooling in the previous ‘hot’ parts of Sydney and Melbourne and remains subdued or downright weak elsewhere. Important in these trends are the early signs that the tightening in regulatory rules surrounding investor loans has started to bite with a small fall in investor loans in the last few months. Next week’s data are likely to show a further pull-back in investor lending.