US inflation steady at 3.7pc

Inflation steady, core easing

US consumer price inflation slowed a little in September to 0.4 per cent. 

Over the year inflation was still a little high, at 3.7 per cent (the same reading as in August).

After two long years, inflation for shelter is now finally set to ease, which should to push core inflation lower over the months ahead as rents ease. 

In September, core inflation fell to the lowest level in two years at 4.1 per cent, with further declines likely ahead. 

Source: Bureau of Labor Statistics

Overall, a little hotter than expected, which keeps markets guessing as to whether the Federal Reserve will deliver one more rate hike.

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Back in Australia, the pace of inflation for construction costs and rents also look to be declining.

CoreLogic did report the growth in annual rents accelerating a little over the past month, to +8.4 per cent.

Source; CoreLogic

The main challenge for buyers remains a lack of quality stock, with total listings still tracking way below average.

Source: CoreLogic

Certainly we're finding that we have to work pretty darned hard to get quality purchases done in Brisbane at the moment. 

Time to buy a dwelling?

Sentiment low

Westpac's consumer sentiment index showed a modest increase in October, but overall consumer confidence remains low in the face of tight lending conditions and a per capita recession. 

The time to buy a dwelling index ticked a little higher, and at least is a little higher than a year ago now, though overall consumers remain fearful of interest rate settings.

House price expectations increased further in October, with the index up +62 per cent over the past year. 

Source: Westpac

ABC News ran a longform piece over the past weeks showing how desperate Aussies are turning to granny flats due a lack of available accommodation (our local notice board has posts every single day from new arrivals looking for a room to rent). 

Normally you'd expect building approvals to respond, but supply remains low and lending setting remain extremely tight - not only with the cash rate target at 4.10 per cent, but with a stress-test lending assessment buffer of 300 basis points in place to reduce financial stability risk. 

Not quite sure what the plan is here...tent cities next?

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Asking prices rose in Sydney and Brisbane over the past month, with asking prices for Brisbane houses piercing $1 million for the first time, up from $650,000 before the initial COVID lockdowns. 

Asking prices for units in Brisbane have also increased from $370,000 to $540,000 since the onset of the pandemic.

In Sydney, asking prices for units have notched a record high, but are only modestly higher than they were half a decade ago in January 2018 (while construction costs have absolutely skyrocketed over the past 3 years). 

We've missed out on a series of auctions and private sales for units in Brisbane over the past month, outbid each and every time. 

Population growth in Queensland is running at around +125,000 per annum. but not nearly enough is being delivered to the market in terms of supply. 

Asking prices in Melbourne, on the other hand, have been fairly flat over recent times. 

Source: SQM Research

This is how to incorporate travel into your plans

Travel plans

Been up in Cairns and at the Reef this week - great part of the world it is too. 

I get asked a lot about travel, and how it can fit manageably into financial and life plans.

I discussed it a bit here (or click on the image below):

2-Sense: Chinese buyers roar back; El Nino impacts farmland valuations

2-Sense podcast

Tune in here (or click on the image space):

You can watch the video version on YouTube here:

Sighs of relief as price pressures tumble

Prices pressure ease

The business surveys are the closest we have to real-time indicators of what's going on in the Aussie economy.

And this was a killer slide from NAB's September Business Survey, showing cost and price pressures easing across the board, and not insignificantly so:

Source: NAB Business Survey

Business conditions eased from +14 to +11, as the previously overheated economy continues to normalise. 

Source: NAB Survey

CommSec kindly went to the trouble of providing a neat graphical summary, which shows from purchase costs, labour costs, and final prices have all eased significantly since peaking at record highs last year. 

Markets liked this very much, and the ASX has shot up +1.21 per cent today, largely due to this news.

Economists are also calling the peak of the interest rate cycle, with the focus likely to shift towards interest rate cuts later in 2024. 

Forward orders picked up a bit, and capacity utilisation is also holding up.

Couldn't have hoped for a much better update than that.

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Builders are finding that although materials price pressures have eased, there are still ongoing skills and labour shortages across the construction sector, with a third of large builders now stuck with negative cashflows. 

As such, developers cannot afford to deliver the required housing today, with the government's stated target of a record 1.2 million homes over 5 years a distant pipedream.

Tax and your property (podcast)

Property Podcast

This week accountancy king George Morice joins Chris Bates to discuss tax and your property (let's not mention NZ beating England in the cricket please George).

Tune in here (or click on the image below):

You can also watch on YouTube here:

This is how to generate passive income

Passive income streams

This week, a Vlog (is that still a thing?) from far north Queensland on how to generate passive income.

Check it out here (or click on the image below):

Jobs, jobs, jobs...

Jobs gains surprise

A big upside surprise for US nonfarm payrolls, with the economy adding +336,000 positions in September.

After revisions, the 3-motnh average gain for payrolls was strong at above +250k. 

Initially markets got very excited and bond yields spiked. 

However, upon delving into the detail, the report wasn't nearly as strong as first assumed.

For example:

The unemployment rate was flat at 3.8 per cent, but is likely to trend higher from here, having been as low as 3.4 per cent earlier in the calendar year. 

Average hourly earnings growth was slow again over the month at +0.2 per cent, taking annual growth in earnings down to +4.1 per cent, the slowest since September 2020. 

Having initially got excited, markets reversed their earlier panic. 

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Australia's 3-year bond yield is trading back down at 4 per cent.