Pete Wargent blogspot

PERSONAL/BUSINESS COACH | PROPERTY BUYER | ANALYST

'Must-read, must-follow, one of the best analysts in Australia' - Stephen Koukoulas, ex-Senior Economics Adviser to Prime Minister Gillard.

'One of Australia's brightest financial minds, must-follow for accurate & in-depth analysis' - David Scutt, Markets & Economics Editor, Sydney Morning Herald.

'I've been investing 40 years & still learn new concepts from Pete; one of the best commentators...and not just a theorist!' - Michael Yardney, Amazon #1 bestseller.

Monday 10 October 2022

Australia flirting with recession

Services recession

AiG's Performance of Services Index nosedived by -5.3 points to a contractionary reading of 48.0 in September.

All sectors were lower, and most are now in contraction, according to AiG's latest release.

Capacity utilisation fell -4.6 points to a reading of 79.1, which is the lowest level since November 2021.

Average wages slowed, while sales prices slowed, putting pressure on margins. 

AiG has previously reported that both house and apartment construction are very deeply into contractionary territory, pulling the construction performance gauge down to just 46.5, which also indicates contraction. 

If you take that at face value, Australia's economy is already into recessionary territory.

It's probably a bit early to be calling a recession, but nevertheless it supports the RBA's decision to slow the pace of rate hikes, with the risks of a so-called wage price spiral melting away.

---

A bit of more confident auction bidding in Melbourne (and also Adelaide) brought the preliminary auction clearance rate up to the highest level since May this weekend. 


Source: CoreLogic

Prices are down - the price indices tend to operate with a significant lag - but the peak of the interest rate panic appears to have passed.