By Alana Sumic in Albert Park We haven’t experienced a recession in nearly 30 years here in Australia. I, for one, have never been through one, the last one being before I was born. But I’ve heard many comments from my parents about previous recessions and what we could expect should there be one sometime soon. Now, I am of the view that the only way we’ll see our economy revived is post-recession, but when that comes, no one can predict. All we can do is look at the markets and economy as indicators. And just at a quick glance, it doesn’t look positive. With the RBA cutting interest rates last week, consumer confidence plundered, so much so that NAB believes we’re currently in a retail recession. But before we get to that, let’s look at the Australian economy. It’s stubborn. We’re at 0% inflation, unemployment is fluctuating, but underemployment is climbing. The jobless rate is rising and growth is slowing, the housing market is down, and consumers aren’t buying. The economy is treading water, but the real question is, how long before it sinks? So more Australians are working than ever before, and Treasurer Josh Frydenberg believes that the economy is remaining afloat due to the strong labour market. As he stated it ‘is one of the reasons why the fundamentals of the Australian economy remain sound’. If you look at our unemployment rate, which sits at 5.2%, then we’re a long way off crisis mode. But jobs may be the only thing holding up the economy at the moment. ..............................Advertisement.............................. | REVEALED: The REAL reason Elon Musk was smoking weed on the Joe Rogan podcast It might SHOCK you. But it could also make you stock gains up to 349%...right up to 1,264% (or more). | | Source: Millennium Post | Click here for all the juicy details. |
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Consumers lose confidence The cash rate cut was a move by the central bank to try and stimulate a lagging economy, and an attempt to try and prevent further job losses, but as we mentioned above, it’s got consumers nervous rather than spending. How do we know this? Well, it’s all thanks to NAB’s business survey. And according to that survey, business conditions are ‘well below average’ and it doesn’t look like the weakening is ready to stop. In the last month conditions dropped by two points in the +1 index, however, if you look at it over the past two months, it’s dropped six points. Therefore, conditions now sit 20 points down from their early 2018 peak. NAB reported that the retail sector is ‘clearly in recession’, further stating: ‘This has come as no surprise given the trends in household consumption and retail sales data. ‘In seasonally adjusted terms, conditions in the retail sector are now around levels last seen in the GFC [global financial crisis].’ But it’s not just the retail sector affecting the weakening in business conditions. Mining, transport, and utilities have also played a part in the poor results. We are now seeing the weakest conditions since 2013, as you can see in the graph below: The downward slide in conditions was due to a -5 points in trading and -4 in profitability last month. But it’s not all bad, with NAB forecasting employment growth of 18,000 per month, for the next six months. ANZ’s head of Australian economics David Plank also commented on the results of the survey: ‘Business conditions haven’t been sustainably below the current level since late 2013. ‘All-in-all we view this as a disappointing business survey.’ Retail falls to GFC lows Business confidence has been on the rebound since the re-election of the Morrison government and subsequently none of the tax measure proposed by Labor will advance. This saw business confidence start from zero and surge to +7 index points the two weeks following the election. However, NAB expects this confidence to only be a one-off, as NAB chief economist Alan Oster explains: ‘Business confidence saw a sharp increase in the month following the federal election and a confirmation from the RBA [Reserve Bank] that rates would be cut in June… ‘Forward-looking indicators suggest that the bounce in confidence is likely to be short-lived and that conditions are unlikely to turn around any time soon. ‘We will also continue to closely watch the employment index for a lead on any turning points in the labour market.’ But the bad news doesn’t stop there. Speaking on the NAB Economics podcast, Oster stated that the retail sector was now ‘GFC-level terrible’. ‘Retail is really, really doing it tough, and it’s getting worse… ‘While the retail industry has lagged the other sectors for some time, the recent deterioration has seen conditions in the industry fall to levels not seen since the GFC… ‘This suggests that the consumer remains highly cautious with anything but spending on essentials because of ongoing slow income growth, high debt levels and possibly some concerns over falling house prices.’ Oster tried not to ‘overemphasise’ the negativity in the sector, but said ‘readings of -27, which we’ve got in retail, is so grim’. Overall, the current state of the retail sector is just the beginning of the cracks we’re starting to see surface in the economy. No one likes bad news, but it’s always best to be prepared. I just can’t see Australia escaping another recession, which is looking more likely. Kind regards, Alana Sumic, Editor, Markets & Money ..............................Advertisement.............................. | The 5G Invasion… In the words of MIT Technology Review, 5G is the genesis of ‘the next technological revolution’ It’s the next evolution of the internet. And it looks set to change EVERYTHING. ZDNet says it’s going to ‘…replace the future’. The Financial Times calls it ‘…a game changer for humanity’. MIT Technology Review continues. Calling it a ‘…paradigm shift, akin to the shift from the typewriter to the computer’. And when it officially launches around 30 June this year, it could gift you the biggest investment gains of your life. CLICK HERE for all the details | .......................................................................... |
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