But the miss was largely explained by the much greater than usual number of people not considered employed but who had a job to start in February.Īccording to the ABS, the proportion of the not employed population who were waiting to start work increased from an average of 2.4% for 2016-2020 to 3.4% in January 2023. The January print threw up an unexpected decline in employment of 11.5k (compared to the market median forecast of +20k). Markets will be firmly fixated on the February labour force survey this week. We would be surprised to see conditions and the prices gauges in the NAB survey further consolidate this week. On balance we expect January to be the outlier compared to the trend in Q4 22.
The February survey will clarify if the strengthening in business conditions, prices and labour costs was an anomaly in January. The prices and labour cost measures followed a similar trajectory to business conditions over Q4 22 and January. But the measures on forward orders, employment, profitability and trading all strengthened in January. But the RBA appears not to place much weight on the PMIs in Australia.īusiness conditions were on a softening trend through Q4 22 according to the NAB survey.
#DUNNO INSTRUMENTAL UPDATE#
We also like the Markit PMIs for a timely monthly update on business conditions and price changes. The measures on business confidence in the survey are less relevant from a policy perspective. The RBA closely watches this survey for a monthly pulse on conditions and price pressures in the private sector. NAB Business Survey (14 March)įirst cab off the data rank is the February NAB business survey. But the chief metrics in February are inflation and the unemployment rate. Retail sales and business conditions will be important. We consider the labour force survey and the monthly CPI indicator to be the data of the four aforementioned releases that carries most weight. The fallout from the collapse of Silicon Valley Bank (SVB) creates an additional layer of uncertainty ahead of the April Board meeting. The difficulty for market participants and the Board will be assessing a mixed set of results – some stronger and some weaker than expected. Conversely, a weaker than anticipated set of outcomes will mean the RBA pauses. A stronger than expected set of numbers across all releases will see the RBA hike the cash rate in April. There are limitless configurations of how the collective data may print. All four releases relate to the month of February. The four releases are monthly data on the labour force, retail sales, inflation and the NAB business survey. The Governor noted in the Q&A session that four key domestic data releases will inform the Board’s decision to either hike the cash rate in April or leave policy on hold. At what point it will be appropriate to pause will be determined by the data and our assessment of the outlook.” The RBA Governor stated in his speech last week, “with monetary policy now in restrictive territory, we are closer to the point where it will be appropriate to pause interest rate increases to allow more time to assess the state of the economy. The RBA is willing to pause in their tightening cycle at the April Board meeting. Governor Lowe tells us what to watch this month The RBA has a much more potent policy transmission mechanism than most other central banks as changes in the cash rate directly impact the cash flow of people with variable-rate mortgages.The RBA will run their own race from here and we expect the recent divergent tone between the RBA and the US Federal Reserve to persist.
At this stage we marginally favour a 25bp rate hike in April, but that call will be under review as the data prints over the next few weeks.The four publications are the February NAB business survey (14/3), February labour force survey (16/3), February retail sales (28/3) and the February monthly CPI indicator (29/3).Four domestic economic data releases will inform the Board’s decision to either hike the cash rate or leave policy on hold in April.The April RBA Board meeting is ‘live’ – the case to leave the cash rate on hold or increase it by a further 25bp to 3.85% will be debated.
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