Day: August 13, 2024

Australia’s wage growth posted its slowest growth in a year in the June quarter, reflecting the gradual loosening of labor market, official data revealed on Tuesday.

Consumer confidence improved in August as the support from tax cuts and other fiscal measures became more apparent, a private survey showed today.

The wage price index climbed 0.8 percent sequentially, following a 0.9 percent rise in the first quarter, the Australian Bureau of Statistics reported. A similar slower growth was last seen in the second quarter of 2023.

On a yearly basis, wage growth steadied at 4.1 percent.

The public sector contributed about 25 percent of overall wage growth in June quarter. Public sector wages rose at a faster pace of 0.9 percent, while growth in private sector wages eased to 0.7 percent from 0.9 percent.

“The stronger June quarterly rise for the public sector was largely due to the newly synchronised timing pattern of Commonwealth public sector agreement increases,” ABS head of prices statistics Michelle Marquardt said.

Capital Economics’ economist Abhijit Surya said wage pressures are expected to ease but there are reasons to think that the Reserve Bank won’t change course on policy anytime soon.

Earlier, RBA Chief Michele Bullock said that if productivity does not improve, then wage rises of around 3.5 percent might not be enough to keep unit labor costs contained.

The economist said the Board will err on the side of caution and hold off on cutting rates until the second quarter of 2025.

The Westpac-Melbourne Institute Consumer Sentiment Index rose to 85 in August from 82.7 in July.

The improvement centered around family finances, while cost of living and fears of rate hike continued to weigh heavily.

“It seems likely that the Board will hold the cash rate unchanged at its next meeting,” Westpac’s head of Australian macro-forecasting Matthew Hassan said.

Elsewhere, the NAB business confidence survey showed that the business conditions index improved to +6 in July. On the other hand, the business confidence index dropped to +1 point.

German economic sentiment deteriorated in August on ambiguous monetary policy, disappointing data from the US economy and escalating conflicts in the Middle East, survey results from the think tank ZEW showed Tuesday.

The ZEW Indicator of Economic Sentiment declined sharply by 22.6 points to 19.2 from 41.8 in July. The last time expectations deteriorated in a similar manner was July 2022.

This was the second consecutive fall and came in sharply below economists’ forecast of 30.6.

The assessment of the current economic situation also deteriorated in August. The corresponding indicator slid 8.4 points to minus 77.3 points.

ZEW President Achim Wambach said economic expectations for the euro area, the US and China also deteriorated markedly. Consequently, the expectations for export-intensive German sectors were particularly affected.

“It is likely that economic expectations are still affected by high uncertainty, which is driven by ambiguous monetary policy, disappointing business data from the US economy and growing concerns over an escalation of the conflict in the Middle East,” said Wambach.

The survey showed that sentiment among financial market experts concerning the development of the euro area registered the steepest fall since April 2020. The economic sentiment index plunged 25.8 points to 17.9 in August.

However, the current situation index improved 3.7 points to -32.4 in August.

The slower-than-expected deceleration in the UK wage growth supports the case for gradual interest rate cuts by the Bank of England later this year after a quarter-point reduction early this month.

Average earnings excluding bonus climbed 5.4 percent in the three months to June from the previous year, slower than the 5.8 percent rise in the prior period, the Office for National Statistics said Tuesday.

This was the weakest growth since mid-2022 but the growth rate was stronger than economists’ forecast of 4.6 percent.

At the same time, average earnings including bonuses grew 4.5 percent, weaker than the 5.7 percent increase in the three months to May.

The unemployment rate fell to 4.2 percent in the three months to June period, while it was expected to rise marginally to 4.5 percent from 4.4 percent in the preceding period.

In July, payrolled employees increased 24,000 to 30.4 million. This follows an increase of 14,000 in June.

Vacancies decreased for the 25th consecutive period in the three months to July. The number of vacancies shrunk 26,000 on quarter to 884,000.

Further, data showed that about 100,000 working days were lost because of labor disputes in June. The majority of strikes were in the health and social work sector.

The claimant count increased to 1.801 million in July.

The BoE will pause in September before pressing ahead with two more 25 basis points rate cuts in November and December, Capital Economics’ economist Ruth Gregory said.

However, much will depend on a broader range of indicators of price pressures, including services CPI inflation.

The ONS is scheduled to issue inflation data on August 14. Consumer price inflation is expected to pick up to 2.3 percent in July from 2.0 percent in the previous month.

ING economist James Smith said the stickiness in wage growth will keep the bank moving cautiously on rate cuts.

But assuming there is further progress on wage growth and services inflation over the next few months the BoE will accelerate the pace of cuts beyond November, the economist added.