The ugly truth about inflation is households are having to pay more, to buy less.
We have seen this in a number of data points, the most recent is from the UK, where the Office of National Statistics just released their latest data for October. It revealed that UK retail sales fell unexpectedly, adding to the impression that a string of interest-rate hikes designed to beat down inflation is beginning to stymie economic activity.
This is an early indication that overall economic output will probably be weak in the fourth quarter.
Economists were expecting a rise of 0.4% for October. Instead, sales fell to their lowest since February 2021 when Covid restrictions were in place, with retailers citing the cost-of-living crisis and bad weather for the poor performance. It bodes ill for the “golden quarter,” the run-up to Christmas when stores can make a majority of their yearly profits.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
Today’s post is brought to you by Ribbon Property Consultants.
Australian wages accelerated at the fastest pace in over 14 years in the three months through September and reached the Reserve Bank’s forecast peak, while still remaining well below the inflation rate. So in real terms average Australian wages continue to go backwards, against inflation at 5.4%. And productivity improvements are nowhere to be seen, as migration continues at a record pace and unit labour costs rise.
The ABS says the Wage Price Index rose 4% in the third quarter from a year earlier, above economists’ expectations of 3.9% and matching the RBA’s forecast for year’s end, On a quarterly basis, wages grew 1.3%, the highest in the 26-year history of the index.
Annually, seasonally adjusted private sector wages growth was higher than the public sector (4.2% compared to 3.5%). This was the highest annual growth for the private sector since December quarter 2008 and for the public sector since June 2011.
One of the reasons that economists expect Australia will avoid the sort of wage-price spiral that has erupted in some other developed countries is surging immigration that is boosting labor supply and likely reducing the bargaining power of employees.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
Today’s post is brought to you by Ribbon Property Consultants.
Australian wages accelerated at the fastest pace in over 14 years in the three months through September and reached the Reserve Bank’s forecast peak, while still remaining well below the inflation rate. So in real terms average Australian wages continue to go backwards, against inflation at 5.4%. And productivity improvements are nowhere to be seen, as migration continues at a record pace and unit labour costs rise.
The ABS says the Wage Price Index rose 4% in the third quarter from a year earlier, above economists’ expectations of 3.9% and matching the RBA’s forecast for year’s end, On a quarterly basis, wages grew 1.3%, the highest in the 26-year history of the index.
Annually, seasonally adjusted private sector wages growth was higher than the public sector (4.2% compared to 3.5%). This was the highest annual growth for the private sector since December quarter 2008 and for the public sector since June 2011.
One of the reasons that economists expect Australia will avoid the sort of wage-price spiral that has erupted in some other developed countries is surging immigration that is boosting labor supply and likely reducing the bargaining power of employees.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
Today’s post is brought to you by Ribbon Property Consultants.
We look at the latest analysis of housing affordability, based on a range of data, and conclude that it has rarely been worse. In addition, some players are being highly selective in the way they present the data, understating the true picture for many households. We wonder why?
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
Today’s post is brought to you by Ribbon Property Consultants.
Today we walk through the latest and troubling results from our surveys and analysis. Unfortunately, we see a further rise in cash flow stress (something confirmed by other analysts using different methods).
Next week we will be running a live show on the analysis, but today’s show walks through the main highlights.
Given the latest RBA rate hike, we expect more households to get caught out as rate grind higher.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
Today’s post is brought to you by Ribbon Property Consultants.
While analysts still talk about the strength of the consumer, if you chose to look below the hood there are real issues emerging, thanks to the higher for longer interest rates that are now in the system because of Central Banks attempts to quell the inflation that they created by their earlier actions.
Jerome Powell conceded this past week that with perfect hindsight, their monetary policy settings through the pandemic would have been tighter – with rates not dropped so low, and quantitative easing less extreme.
My surveys in Australia continue to highlight the pressure on some households with for the first time more than half of mortgage holders underwater from a cashflow perspective. And its not only in Australia.
Americans, for example are falling behind on their auto loans at the highest rate in nearly three decades. With interest rate hikes making newer loans more expensive, millions of car owners are struggling to afford their payments. It’s a clear indication of distress at a time when the economy is sending mixed signals, particularly about the health of consumer spending.
And in the UK the bad news keeps coming for Britain’s lettings market, as a surge in mortgage payments pushes more landlords to the brink and threatens to pile extra misery on tenants.
Landlords paid 40% more mortgage interest in August than the same month a year ago, equating to an extra £4.3 billion ($5.3 billion), according to a report from broker Hamptons International. Mortgaged landlords handed over an average of 37% of their rental income to pay interest in August, up from 28% a year earlier.
“For some investors, this will be unaffordable,” said Aneisha Beveridge, head of research at Hamptons. “They will likely bow out, keeping upward pressure on rents.”
And more broadly, UK banks expect to tighten a squeeze on the mortgage market in the coming months as high interest rates stretch affordability and loan defaults pick up.
The Bank of England’s quarterly credit conditions survey found that lenders decreased the supply of mortgages in the third quarter and will restrict availability further in the coming months. Defaults and losses on home loans picked up in the third quarter as more households are forced to refinance at much higher interest rates.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
Another Friday chat with Tarric Brooker, complete with charts on the housing market. We look at what is really driving the disequilibrium in the sector, and what the consequences are for people trying to access the market.
You can follow the charts here: https://avidcom.substack.com/p/dfa-chart-pack-20th-october-2023
And read Tarric’s article on housing here: https://avidcom.substack.com/p/in-australia-housing-is-the-economy
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
Digital Finance Analytics (DFA) Blog
The Great Property Paperchase... With Tarric Brooker
Today I want to dissect some the latest data from New Zealand. In summary, inflation and costs of living continue to bite, more households are in financial distress, inward migration is at a record high, but the property market remains in the doldrums. Worth thinking about ahead of the general election at the weekend.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
Elevated inflation means central banks may have to keep policy rates higher in a way that stretches the capacity of borrowers to repay debt said the IMF in its latest Global Financial Stability Report.
And the Bank of England warned in their latest Financial Policy Summary that simply extending the term of mortgage loans is more about protecting banks than borrowers as risks build.
The International Monetary Fund (IMF) has updated its global growth forecasts, with the world expected to grow by 3% this year and 2.9% in 2024. The IMF tips that Australia’s real GDP growth will slow even faster, from just 1.8% this year to 1.2% in 2024.
Headwinds also confront real estate. Home mortgages, typically the largest category of household borrowing, now carry much higher interest rates than just a year ago, eroding savings and weighing on housing markets. Countries with predominantly floating rate mortgages have generally experienced larger home price declines as higher interest rates translate more quickly into mortgage payment difficulties. Australia is highly exposed as rates have moved more on a weighted basis than many other countries.
http://www.martinnorth.com/
Go to the Walk The World Universe at https://walktheworld.com.au/
Digital Finance Analytics (DFA) Blog
Higher-for-Longer Interest Rate Environment is Squeezing More Borrowers
