Australian House Prices, Retail, Manufacturing, Job Ads Plunge

By Jacob Greber

Nov. 3 (Bloomberg) -- Australian house prices fell, retail sales dropped by the most in three years and job advertisements slid for a sixth month, according to reports today that add to signs the nation's economy is slowing.

Separate reports also showed manufacturing contracted at a record pace last month and an index of monthly consumer prices fell for the first time since February 2006, supporting the central bank's view that the fastest inflation since 2001 will slow next year as economic growth cools.

Consumers, businesses and home buyers are scrapping spending plans as turmoil on financial markets threatens to push economies in the U.S., Europe and Japan into recession. The spreading contagion will prompt central bank governor Glenn Stevens tomorrow to add to last month's 1 percentage point cut in the benchmark lending rate, the biggest reduction since a recession in 1992, according to Bloomberg survey of economists.

``The global financial crisis has had a significant impact on the domestic economy,'' said Katie Dean, a senior economist at Australia & New Zealand Banking Group Ltd. in Melbourne.

The Australian dollar traded at 66.02 U.S. cents at 1:12 p.m. in Sydney from 66.45 cents at the close of Asian trading on Oct. 31. The two-year government bond yield gained 4 basis points, or 0.04 percentage point, to 4.33 percent.

An index measuring the weighted average price for established houses in the nation's eight capital cities dropped 1.8 percent from the June quarter, when it fell a revised 0.2 percent, the Bureau of Statistics said in Sydney today. That was the biggest quarterly decline since 1978, ANZ Bank's Dean said.

Job Advertisements

``Ongoing uncertainty, a weaker-than-expected economy and any significant rise in the unemployment rate pose further downside risks to house prices,'' Dean added.

Jobs advertised in newspapers and on the Internet plunged 5.9 percent last month to an average of 231,135 a week, the biggest decline since February 2001, according to an ANZ Bank report released in Melbourne today.

Retail sales, adjusted for seasonal factors, fell 1.1 percent in October from the previous month, the biggest decline since April 2005, a separate report by the statistics bureau showed. That was more than double the 0.5 percent median drop forecast by 14 economists surveyed by Bloomberg.

An index of manufacturing, which accounts for 10 percent of gross domestic product and employs one tenth of the nation's workforce, fell 6.8 points in October, the lowest level since the index was started in 1992, the Australian Industry Group said in Canberra today.

`Crisis of Confidence'

``There is a crisis of confidence arising from a crisis of uncertainty,'' said Heather Ridout, chief executive officer of the Australian Industry Group.

Stevens and his Reserve Bank of Australia board will reduce the overnight cash rate target by half a point to 5.5 percent at 2:30 p.m. tomorrow in Sydney, according to 15 of 16 economists surveyed by Bloomberg. One expects a quarter-point reduction.

Policy makers have cut borrowing costs by 1.25 percentage points since early September after increasing the benchmark rate to a 12-year high 7.25 percent in March to cool inflation that surged to 5 percent in the third quarter. They aim to keep annual price gains to between 2 percent to 3 percent on average.

While inflation is ``likely to remain high in the period immediately ahead,'' there are increasing signs the economy's 17-year expansion is slowing enough to contain future price gains, Stevens said on Oct. 21.

``Forces seem now to be building that will start to dampen pressures on prices -- even though we won't have evidence of that for a good six months,'' he said.

Inflation Gauge

An index measuring Australian inflation fell for the first time since February 2006, according to a monthly gauge released today by TD Securities Ltd. and the Melbourne Institute.

Consumer prices rose 3.9 percent in October from a year earlier, after climbing an annual 4.5 percent in September, TD Securities said. Prices fell 0.2 percent from September, when they gained 0.4 percent.

``The depressed domestic economy, especially for consumer demand, together with the sharp fall in commodity prices, suggests we could be in the early stages of a substantial deceleration in price pressure,'' said Joshua Williamson, a senior strategist at TD Securities in Sydney.

``The momentum on prices that is unfolding is such that inflation is on track to reach the Reserve Bank's target range by the middle of 2009,'' he said

To contact the reporter for this story: Jacob Greber in Sydney at jgreber@bloomberg.net