Wednesday, 6 July 2011 ABS data won't change rate outlook

THE outlook for interest rates is unchanged despite the release of weaker than expected retail trade and building approvals data, economists say.
The Reserve Bank of Australia (RBA) last increased the cash rate in November 2010 from 4.5 per cent to 4.75 per cent and most economists expect the next rise to be in August.
Australian residential building approvals data was released today, showing a fall of 7.9 per cent in May, much larger than the 0.5 per cent drop economists were expecting.
In the year to May, building approvals were down 14.4 per cent, the Australian Bureau of Statistics (ABS) said.

JP Morgan economist Ben Jarman said the drop was payback for gains in recent months.
Westpac senior economist Matthew Hassan said both sets of data show that the consumer and interest-rate sensitive sectors are still fairly weak, but not as poor as the headline suggests.
He said retail sales figures were softer than expected, mainly due to a technical correction, following a particularly strong result in April.
"The April data was simply too strong," Mr Hassan said.
"We think that there are some technical issues around the impact of weather events and volatility in this seasonal series.
"For us, this is a number that brings trend back in line with where we thought it was ... at about 0.3 per cent a month."
Mr Hassan said that dwelling units data was also weaker than expected, partly due to volatility in the data.
"Apartment approvals were down 20 per cent, particularly in NSW and Victoria.
"(But) if you look at the larger, more stable private sector houses component, it was a less negative story."
He did not expect the data to change the central bank's outlook for monetary policy.
"Given that, we're pessimistic on the outlook for new building, we thought that would be delivered in May, but it was even more weaker than expected.
"It is pretty consistent with our story for the housing market, we've got this looming prospect of further rate hikes.
"With the first home-buyer pretty much absent in the market, it will be pretty much hard to achieve any gains in new dwellings."
Mr Jarman expects the RBA to next lift the cash rate in August, which is unchanged from the previous JP Morgan forecast.
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