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Monthly Economic Indicators

Executive Summary

  • July’s data releases showed that confidence in the economic outlook had slipped, export growth weakened and housing market activity slowed.
  • Inflation remained moderate in the June quarter, but with spare capacity exhausted, price pressures are expected to intensify.
  • The international economy showed signs that growth has strengthened, while inflation is rising in the major advanced economies apart from Europe.

Data released in July suggested that the pace of expansion in the economy eased in the June quarter. Business confidence retreated from the very high levels reached earlier in the year, but remained well above average. Export values fell sharply in the June quarter as both prices and volumes weakened. Import values rose modestly but the exchange rate appreciated, reducing import prices, pointing to a larger increase in import volumes. As a consequence, net exports are expected to make a negative contribution to real GDP growth in the June quarter.

Migration inflows remained strong in June, adding to the labour supply, but activity in the housing market subsided and house price inflation eased. High levels of migrant inflows may contribute to ongoing moderate wage growth in the June quarter labour market release on 6 August. Inflation also remained moderate in the June quarter, and is not expected to rise above the current 1.6% annual rate before the end of the year.

Spare capacity has fallen and output in the economy is estimated to be close to its potential (or trend) level, pointing to rising inflationary pressures over 2015. Reflecting this, the Reserve Bank increased the Official Cash Rate to 3.5% in July. The Reserve Bank expects to increase the OCR further, but the timing of future increases is dependent on developments in the economy over the coming months.

In the world economy, GDP growth stabilised in China in the June quarter and strengthened on balance in the advanced economies. Inflation is rising in most of the advanced economies owing to rising demand or country-specific factors.

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