1 00:00:08,220 --> 00:00:10,350 Sean Aylmer: Welcome to Fear and Greed, The Week Ahead. I'm Sean 2 00:00:10,619 --> 00:00:14,310 Sean Aylmer: Aylmer. As always, I'm joined by economist Stephen Koukoulas this 3 00:00:14,310 --> 00:00:18,480 Sean Aylmer: fine Monday morning. You'll find him at thekouk. com, T- H- E- K- O- U- K. 4 00:00:18,630 --> 00:00:23,700 Sean Aylmer: com, and on Twitter using the handle, @ TheKouk. Stephen, it's 5 00:00:23,700 --> 00:00:25,950 Sean Aylmer: pretty much the end of the holiday season, isn't it? 6 00:00:25,950 --> 00:00:27,630 Sean Aylmer: Are you prepared for a big year? 7 00:00:28,500 --> 00:00:30,780 Stephen Koukoulas: It is the end of the holiday season, and yes. 8 00:00:31,680 --> 00:00:34,050 Stephen Koukoulas: Having said that, even the first four or five, four 9 00:00:34,050 --> 00:00:36,300 Stephen Koukoulas: and a half weeks of January have been super, duper 10 00:00:36,300 --> 00:00:40,950 Stephen Koukoulas: busy anyway, surprisingly. People are back in town doing things 11 00:00:40,950 --> 00:00:44,970 Stephen Koukoulas: and the data's been flowing thick and fast. Oh, '23 12 00:00:44,970 --> 00:00:47,340 Stephen Koukoulas: will be an absolute boom year, I'm sure, in terms 13 00:00:47,340 --> 00:00:49,170 Stephen Koukoulas: of the busyness, not so much the economy. 14 00:00:49,620 --> 00:00:53,309 Sean Aylmer: Right. Well, let's start with that and what happened last 15 00:00:53,310 --> 00:00:57,570 Sean Aylmer: week. The data did flow thick and fast. The CPI, 16 00:00:57,570 --> 00:00:59,400 Sean Aylmer: the consumer price index came out from the Bureau of 17 00:00:59,400 --> 00:01:03,180 Sean Aylmer: Statistics and it was kind of higher than most people expected. 18 00:01:03,570 --> 00:01:06,240 Stephen Koukoulas: It was a funny one. Higher than the financial markets 19 00:01:06,240 --> 00:01:09,360 Stephen Koukoulas: who sort of talked themselves into a low outcome over 20 00:01:09,360 --> 00:01:11,459 Stephen Koukoulas: the last few weeks. But when we look at what 21 00:01:11,459 --> 00:01:14,339 Stephen Koukoulas: the Reserve Bank was saying in November, in their most 22 00:01:14,340 --> 00:01:19,050 Stephen Koukoulas: recent published forecasts, they're anticipating annual headline inflation to hit 23 00:01:19,050 --> 00:01:24,450 Stephen Koukoulas: 8%. So above market expectations, below RBA expectations. But in 24 00:01:24,450 --> 00:01:26,760 Stephen Koukoulas: a sense, we knew it was going to be a 25 00:01:26,760 --> 00:01:30,690 Stephen Koukoulas: high number. We knew all of the indicators on building 26 00:01:30,690 --> 00:01:34,319 Stephen Koukoulas: costs, on holiday travel, on petrol, on all of these 27 00:01:34,319 --> 00:01:36,780 Stephen Koukoulas: sorts of things that were coming through in terms of 28 00:01:37,230 --> 00:01:40,709 Stephen Koukoulas: higher inflation pressures were there. So we were sort of 29 00:01:40,709 --> 00:01:42,929 Stephen Koukoulas: in a sense quibbling about whether it was 7. 5 30 00:01:42,930 --> 00:01:44,940 Stephen Koukoulas: or 7. 8 or 8, yeah, whatever it was a 31 00:01:44,940 --> 00:01:48,240 Stephen Koukoulas: high result. But it certainly did spark the markets into 32 00:01:48,240 --> 00:01:52,440 Stephen Koukoulas: thinking that the February board meeting from the RBA could 33 00:01:52,440 --> 00:01:55,920 Stephen Koukoulas: well consider the 25- point rate hike. Whereas before the 34 00:01:55,920 --> 00:01:58,770 Stephen Koukoulas: number was out it was sort of less than 50/50. 35 00:01:58,770 --> 00:02:01,650 Stephen Koukoulas: So the data flow over the next week and a 36 00:02:01,650 --> 00:02:05,070 Stephen Koukoulas: bit until next Tuesday's RBA board meeting, will be really 37 00:02:05,070 --> 00:02:07,321 Stephen Koukoulas: important for them to deliberate on. 38 00:02:07,321 --> 00:02:10,650 Sean Aylmer: Okay, so let's get into that. Retail sales is the 39 00:02:10,650 --> 00:02:13,410 Sean Aylmer: big one this week, particularly after the big jump, retail 40 00:02:13,410 --> 00:02:16,079 Sean Aylmer: sales for December. There was a big jump in November. 41 00:02:16,860 --> 00:02:19,919 Stephen Koukoulas: Indeed. The big jump in November was linked to the 42 00:02:19,919 --> 00:02:23,160 Stephen Koukoulas: Black Friday sales at the end of the calendar month. 43 00:02:23,820 --> 00:02:26,610 Stephen Koukoulas: From what we can work out, and again, the banks 44 00:02:26,610 --> 00:02:30,120 Stephen Koukoulas: do a terrific job looking at their own internal transactions 45 00:02:30,120 --> 00:02:33,000 Stephen Koukoulas: data, the credit card data, and these sorts of things. 46 00:02:33,780 --> 00:02:36,959 Stephen Koukoulas: The ones that I've seen are suggesting that December will 47 00:02:36,960 --> 00:02:39,330 Stephen Koukoulas: be something of a pullback, that people did spend up 48 00:02:39,330 --> 00:02:42,389 Stephen Koukoulas: big, whether it was just spending money for the sake 49 00:02:42,389 --> 00:02:44,250 Stephen Koukoulas: of it or buying their Christmas presents early, we're not 50 00:02:44,250 --> 00:02:47,730 Stephen Koukoulas: sure. But December, even though the retailers are reporting a 51 00:02:47,730 --> 00:02:52,560 Stephen Koukoulas: generally good Christmas sales period for the ABS and the 52 00:02:52,680 --> 00:02:55,440 Stephen Koukoulas: retail sales data, we are looking for a small fall, 53 00:02:55,440 --> 00:02:59,639 Stephen Koukoulas: maybe about a 0.3 or 0. 4 decline after a 1. 4% rise, 54 00:03:00,389 --> 00:03:03,870 Stephen Koukoulas: sort of just signaling that retail spending is okay, certainly 55 00:03:03,930 --> 00:03:06,540 Stephen Koukoulas: slower than it was at the start of 2022, but 56 00:03:06,540 --> 00:03:09,600 Stephen Koukoulas: not crashing and not free falling. So we'll just see 57 00:03:09,660 --> 00:03:11,010 Stephen Koukoulas: the extent of that pullback. 58 00:03:11,850 --> 00:03:14,340 Sean Aylmer: What about the building industry? We've got building approvals out 59 00:03:14,340 --> 00:03:16,410 Sean Aylmer: this week. Is that still sliding? 60 00:03:16,620 --> 00:03:21,240 Stephen Koukoulas: Yeah. The housing side of the construction industry is certainly weakening. 61 00:03:21,570 --> 00:03:23,910 Stephen Koukoulas: Remember that in a sense it's not so much a 62 00:03:23,910 --> 00:03:28,560 Stephen Koukoulas: problem because federal and state governments implemented a range of 63 00:03:28,950 --> 00:03:32,910 Stephen Koukoulas: construction programs during the depths of COVID. That was one industry 64 00:03:32,910 --> 00:03:35,640 Stephen Koukoulas: that sort of continued to run along. People were outside 65 00:03:35,640 --> 00:03:38,070 Stephen Koukoulas: and there was less chance of catching COVID. So they 66 00:03:38,070 --> 00:03:41,700 Stephen Koukoulas: had all these incentives of people to build dwellings, and 67 00:03:41,700 --> 00:03:43,320 Stephen Koukoulas: they certainly did. When we look at the numbers in 68 00:03:43,320 --> 00:03:49,050 Stephen Koukoulas: 2021 and early 2022, there was a construction approvals boom. 69 00:03:49,230 --> 00:03:52,950 Stephen Koukoulas: Fair enough. Those incentives came to an end early in 2022. 70 00:03:52,950 --> 00:03:56,340 Stephen Koukoulas: Since then, building approvals have been trending lower. In a sense, 71 00:03:56,340 --> 00:03:58,530 Stephen Koukoulas: there was a bring forward of activity. So there's still 72 00:03:58,530 --> 00:04:01,800 Stephen Koukoulas: a fair bit of construction in the pipeline. But future 73 00:04:01,800 --> 00:04:05,490 Stephen Koukoulas: activity as these building approvals continue to trend lower will be, yeah, 74 00:04:05,490 --> 00:04:08,880 Stephen Koukoulas: a little bit problematic for the industry. Non- res building approvals, again, 75 00:04:08,880 --> 00:04:11,010 Stephen Koukoulas: a bit choppy, it depends what you're doing. Not a 76 00:04:11,010 --> 00:04:15,630 Stephen Koukoulas: lot of demand for office space in CBD areas or big 77 00:04:15,630 --> 00:04:20,279 Stephen Koukoulas: shopping centers. But things like warehouses and those sorts of 78 00:04:20,279 --> 00:04:22,001 Stephen Koukoulas: things are certainly getting a bit of a wriggle along. 79 00:04:21,600 --> 00:04:25,020 Sean Aylmer: Okay. We'll get Reserve Bank credit data, as well. 80 00:04:25,560 --> 00:04:28,560 Stephen Koukoulas: Yeah, again, we're looking for housing credit to continue to 81 00:04:28,560 --> 00:04:32,370 Stephen Koukoulas: slow in line with the housing cycle. Business credit probably 82 00:04:32,370 --> 00:04:35,730 Stephen Koukoulas: ticking along. So an interesting one, not the be all 83 00:04:35,730 --> 00:04:37,529 Stephen Koukoulas: and end all, but we do know the RBA look 84 00:04:37,529 --> 00:04:38,850 Stephen Koukoulas: at it and if they look at it, I look 85 00:04:38,850 --> 00:04:41,370 Stephen Koukoulas: at it too. Yeah, we'll probably see just a moderate 86 00:04:41,370 --> 00:04:43,200 Stephen Koukoulas: increase in credit growth. 87 00:04:44,279 --> 00:04:46,770 Sean Aylmer: Stephen, we have to talk house prices as well because, 88 00:04:46,770 --> 00:04:48,480 Sean Aylmer: of course, it's the end of the month this week, 89 00:04:48,630 --> 00:04:51,630 Sean Aylmer: so CoreLogic will come out with this house price index. 90 00:04:51,870 --> 00:04:53,850 Sean Aylmer: Surely, it's going to be good news. Surely? 91 00:04:54,630 --> 00:04:55,620 Stephen Koukoulas: Depends whether you're a buyer or a seller. 92 00:04:57,060 --> 00:04:57,690 Sean Aylmer: Ah, yeah, good answer. 93 00:04:58,320 --> 00:05:01,050 Stephen Koukoulas: But the prices will be down. We know from the 94 00:05:01,050 --> 00:05:05,010 Stephen Koukoulas: high frequency publications of daily data, heaven forbid, that the 95 00:05:05,010 --> 00:05:09,630 Stephen Koukoulas: prices nationwide will be down, look around about 1%, plus 96 00:05:09,630 --> 00:05:13,740 Stephen Koukoulas: or minus a tenth or two. Sydney, Brisbane leading the 97 00:05:13,740 --> 00:05:18,720 Stephen Koukoulas: way. Melbourne, the rate of decline's moderated a bit. Perth and Adelaide, 98 00:05:18,720 --> 00:05:22,260 Stephen Koukoulas: which had been remarkably resilient up until literally a month 99 00:05:22,260 --> 00:05:26,460 Stephen Koukoulas: ago, will probably show small falls. So the housing market's 100 00:05:26,460 --> 00:05:28,650 Stephen Koukoulas: starting to trend lower. Although having said that, if we 101 00:05:28,650 --> 00:05:31,200 Stephen Koukoulas: look at the within month data, don't mean to be 102 00:05:31,200 --> 00:05:34,770 Stephen Koukoulas: too boring here, but there is just tentative evidence that 103 00:05:34,770 --> 00:05:38,099 Stephen Koukoulas: the rate of decline is starting to moderate. So down 104 00:05:38,100 --> 00:05:40,350 Stephen Koukoulas: 1% or thereabouts in the month. We really want to 105 00:05:40,350 --> 00:05:42,300 Stephen Koukoulas: see the February data to see whether we are getting 106 00:05:43,020 --> 00:05:45,900 Stephen Koukoulas: some sort of buyer demand coming back into the housing side. 107 00:05:46,320 --> 00:05:47,520 Sean Aylmer: Stephen, have a great week. 108 00:05:47,850 --> 00:05:48,720 Stephen Koukoulas: Thank you, Sean. You, too. 109 00:05:49,230 --> 00:05:51,750 Sean Aylmer: That was economist Stephen Koukoulas. Better known as The Kouk. 110 00:05:51,750 --> 00:05:53,789 Sean Aylmer: You can find him at thekouk. com and follow him 111 00:05:53,790 --> 00:05:56,670 Sean Aylmer: on Twitter using the handle @ TheKouk. I'm Sean Aylmer and 112 00:05:56,670 --> 00:05:58,440 Sean Aylmer: this is Fear and Greed, The Week Ahead.