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Friday, 9 December 2022

Disinflation is coming...

Job vacancies drop again

Job vacancies dropped another -3.4 per cent or -9,600 in November. 

Notably hospitality vacancies are dropping fairly quickly now.

Only a couple of months ago the staff shortages were very much in evidence in retail and hospitality, with many outlets advertising for staff, but these seems to be easing nicely as working holidaymakers and students return to Australia. 

I think the below chart is via Justin Fabo of Macquarie Macro Strategy. 

Job advertisements in the two economic powerhouse states of New South Wales and Victoria are dropping quickly now.

There's some solid evidence here to suggest that the cash rate target was already into moving a contractionary setting even before the November and December interest rate hikes added fuel to the fire. 

Disinflation to deflation

Every day comes another report of global inflation weakening, as supply chains right themselves, fuel prices fall, and shipping rates plunge. 

Today, China's inflation figure fell to just 1.6 per cent, which is an extraordinarily low level for China.

Yesterday, the Netherlands saw a negative -3 per cent print for monthly inflation, while Germany, Spain, and other European countries are now seeing inflation begin their plummet back down to earth. 

There are some concerns that rising wages could see inflation stick around for longer, especially in the US, where there have been reports of big wage rises being awarded in some sectors.

Of course, the next inflation figures will be watched very closely for the US, with market expectations looking for core inflation to decline from 6.3 per cent to 6.1 per cent over the year.

Australia doesn't have the wages inflation problem so much, however, with wage price growth of only 3.1 per cent over the past year, and anyway it mostly wasn't wages that drove inflation higher.

Inflation was largely driven by supply issues - which are now quickly being resolved - and partly by stimulus payments, which are now being run down.