mi exp chart pack aug 2013

7/27/2019 Mi Exp Chart Pack Aug 2013

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ConsumerexpectationsInflation & unemploymentexpectation chart pack.

August 2013


2/35

Westpac-Melbourne Institute Consumer unemployment expectations

The unemployment expectations index was flat in Aug, following onfrom a 3.6% fall in Jul, a 6.3% rise in Jun & a 5.4% rise in May. Theannual pace continues to ease dropping from 3.2%yr in Jul to 0.7%yr in Aug. However, as there has only been one decline in thelast three months the trend is still rising, up 1.1%mth and 2.1%yr.

The trend level of the index is 23% higher than its long run average.This is something we are watching closely as it suggests we are still ina soft patch for the labour market and that unemployment is set tocontinue to rise in the year ahead.

In particular, the index is pointing to a very weak near-term outlook

for full-time employment and total hours worked. By city, the largest deterioration has occurred outside Sydney &

Melbourne. In particular, WA is now the most pessimistic about thelabour market while Qld is not far behind.

2


3/35

Westpac-Melbourne Institute Consumer unemployment expectations (cont)

In particular, we are watching with interest the growing labourmarket concerns by paraprofessional & trades - they had beenmore optimistic than the average and have now caught the morepessimistic managers & professionals. This is matched by rising

job insecurity from those with higher education and mortgagors

As the mining sector starts to wind down its investment surge, andthe domestic construction/manufacturing sectors servicing it startto feel the pinch, job insecurity has increased among bothmanagers & professionals.

Interestingly labourers & operators have become a touch more

optimistic, while the expectations of sales & clerical employeeshave deteriorated to meets those of labourers.

The level of the unemployment index, and the fact it is risingagain, suggests the RBA still has room to cut rates further.

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4/35

Labour market concerns still trending higher

80

100

120

140

160

180

200

80

100

120

140

160

180

200

Aug-88 Aug-93 Aug-98 Aug-03 Aug-08 Aug-13

indexindex

unemployment expectations

unemployment expectations trend

Sources: Westpac-MI

unemployment

expected to rise

unemploymentexpected to fall

peak,Feb 09

4


5/35

pointing to rising unemployment

80

100

120

140

160

180

200

-200

-100

0

100

200

300

400


indexannual change in unemployment rate smoothed (lhs)

unemployment expectations trend (rhs)

bps

unemploymentrising

unemploymentfalling

Sources: ABS, Westpac Economics,Melbourne Institute

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6/35

...as employment lags population growth...

-150

-100

-50

0

50

100

150

200-80

-60

-40

-20

0

20

40

Aug-95 Aug-99 Aug-03 Aug-07 Aug-11

bps ttyunemploy. expectations (lhs leading 4mths)change in employ/pop ratio (rhs)

% long run average


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7/35

...and full-time employment fades...

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0-30

-20

-10

010

20

30

40

50 Aug-99 Aug-03 Aug-07 Aug-11

% 3mth

unemploy. exp* (lhs leading2mths)trend full-time employ (rhs)

% inverted

*trend represented as deviation from 10 year average


7


8/35

...holding back the overall labour market.

-1.0

-0.5

0.0

0.5

1.0

1.5-40

-30

-20

-10

0

10

20

30

40

50Jul-99 Jul-03 Jul-07 Jul-11

% 3mth% deviation

unemployment expectations

trend* (lhs leading 2mths)trend total employment (rhs)

Sources: Westpac-MI, ABS* represented as deviation from full history average

8


9/35

Hours worked rising again...

-5.0

-3.0

-1.0

1.0

3.0

5.0-50

-30

-10

10

30

50


% yr

unemploy. expectations (lhs leading 4mths)

hours worked %yr (rhs)

% long run average Sources: Westpac-MI, ABS

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10/35

...which looks odd compared to expectations.

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5-50-40

-30

-20

-100

10

20

3040

50 Aug-95 Aug-99 Aug-03 Aug-07 Aug-11

% 3mth

unemploy. expectations* (lhs leading 1mth)trend hours worked (rhs)

% long run average Sources: Westpac-MI, ABS

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11/35

Those working a smidge more more worried

60

70

80

90

100

110

120

130

140

150

60

70

80

90

100

110

120

130

140

150

Jul-00 Jul-03 Jul-06 Jul-09 Jul-12

indexindexworking

unemploy/retired/not working

Sources: Westpac-MI

Long run average = 100

11


12/35


13/35

as are those with tertiary/trade education

60

70

80

90

100

110

120

130

140

150

60

70

80

90

100

110

120

130

140

150


indexindex

PrimaryTertiarySecondary

Trade

Sources: Westpac-MI

Unemployment expectations by occupation LR ave = 100

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14/35

with males increasingly more pessimistic.

607080

90100110120

130140150160

607080

90100110120

130140150160


indexindex

Male Female

Sources: Westpac-MI

Unemployment expectations by occupation LR ave = 100

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15/35

Living with/without children no variance

607080

90100110120

130140150160

607080

90100110120

130140150160


indexindex

Live with children


16/35

but mortgagors are more pessimistic.

607080

90100110120

130140150160

607080

90100110120

130140150160


indexindex

tenant

mortgagor

owned

Sources: Westpac-MI

Unemployment expect by household type LR ave = 100

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17/35

The south east cities are the most optimistic...

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90

100

110

120

130

140

150

60

70

80

90

100

110

120

130

140

150


indexindex

Sydney

Melbourne

Remaining cities

Sources: Westpac-MI

Unemployment expectations by state LR ave = 100

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18/35

& WA the most pessimistic

607080

90100110120

130140150160

607080

90100110120

130140150160


indexindex

NSW WA

Vic Qld

Sources: Westpac-MI


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19/35

but rural areas just as pessimistic as urban.

60

70

80

90

100

110

120

130

140

150

60

70

80

90

100

110

120

130

140

150


indexindex

urban

rural

Sources: Westpac-MI


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20/35

NSW full-time has fallen to expectations

-2.0

-1.0

0.0

1.0

2.0-50-40-30-20

-100

1020


% 3mth

unemploy. exp* (lhs)

trend full-time employ (rhs)

% inverted

*trend represented as deviationfrom 10 year average


20


21/35

Vic expectations still weaker than employ

-2.0

-1.0

0.0

1.0

2.0-50-40-30-20

-100

1020

304050 Aug-98 Aug-02 Aug-06 Aug-10

% 3mth

unemploy. exp* (lhs leading 2 mths)


% inverted *trend represented as deviationfrom 10 year average


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22/35

Qld jobs now stronger than expectations

-1.0

0.0

1.0

2.0

3.0-50-40-30-20

-100

1020

304050 Aug-99 Aug-03 Aug-07 Aug-11

% 3mthunemploy. exp* (lhs leading 2 mths)


% inverted



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23/35

WA expectations on a downward slide

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0-50-40-30-20-10

0102030


% 3mth

unemploy. exp* (lhs leading 2 mths)trend full-time employ (rhs)

% inverted



23


24/35

Job worries will keep rate cuts on the table

80

100

120

140

160

180-500

-400

-300

-200

-1000

100

200

300


Index invert.

annual change in cash rate (lhs)

forecastsunemployment expectations trend (rhs)

bps

Source: Westpac-MI

When unemployment expectations improve, theRBA tightens monetary policy

When unemploymentexpectation deteriorate, theRBA eases monetary policy

24

Sources: RBA, Westpac Economics,Melbourne Institute


25/35

as the labour market softens again.

-48

-32

-16

016

32

48

64

80-500

-400

-300

-200

-1000

100

200

300


%yr

annual change in cash rate (lhs)forecastschange in expectations (rhs)

bps

Source: Westpac-MI

When unemployment expectationsimprove, the RBA tightens monetary policy

When unemploymentexpectation deteriorate, theRBA eases monetary policy

25


26/35

Westpac-Melbourne Institute Consumer inf lationary expectations

Consumer inflationary expectations eased 0.2ppt to 2.2%yr in Aug.The trend had been drifting higher, but the 2.32%yr print for Julwas revised to 2.28%yr and it was broadly flat at 2.27%yr in Aug.

The median expected inflation rate of managers & professionalsalso eased back to 2.7% in July after printing 3.1%yr in Jul,2.6%yr in Jun & 2.4%yr in May. The trend is drifting higher formanagers & professionals, 2.81%yr from 2.76%yr in Jul (revisedfrom the earlier estimate of 2.79%yr).

Inflationary expectations remain anchored around the mid-point,or lower half, of the RBA's target band. In addition, the net balance

of those households expecting price rises vs. those expecting haseased back to 64.1% and is below the longer run average of 75.6%.So even if the trend is still drifting higher, it does not highlight aninflationary risk. A net balance greater than the average points to abroadening of inflationary expectations.

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27/35

Inflation expectations remain well anchored

0

1

2

3

4

5

6

7

0

1

2

3

4

5

6

7


% ann% ann

trend median

Sources: ABS, Westpac Economics, Melbourne Institute

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28/35

Expectations still well below longer run average

-1

0

1

2

34

5

6

7

-1

0

1

2

34

5

6

7


% ann% annCPIprofessionals trendconsumers trend


Spikehigher pre

GST

A real inflation spike

Carbon priceboost very

small

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29/35

Net balance rising but still very low

-1

0

1

2

3

4

5

6

7

40

50

60

70

80

90

100


% ann%CPI (rhs)

net balance (lhs)*


average since1995

*% expecting prices to riseminus % expecting prices to fall

29


30/35

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31/35


32/35

NSW hours worked robust for now

-4.0-3.0-2.0

-1.00.01.02.0

3.04.05.06.0-50

-40-30-20

-100

1020

304050

Jul-97 Jul-00 Jul-03 Jul-06 Jul-09 Jul-12

% yr unemploy. exp* (lhs leading 2 mths)trend hours worked (rhs)

% invertedSources: Westpac-MI, ABS


32


33/35

Vic hour worked returns to expectations

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0-50-40-30-20

-100

1020

304050


% yr

unemploy. exp* (lhs leading 2 mths)

trend hours worked (rhs)


*represented as deviation from10 year average

33


34/35

Qld expectations still very weak

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0-50-40-30-20

-100

1020

304050


% yr unemploy. exp* (lhs leading 3 mths)

trend hours worked (rhs)

% inverted

Sources: Westpac-MI, ABS


34


35/35

WA expectations much weaker than jobs

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0-50-40-30-20-10

0102030

405060


% 3mth

unemploy. exp* (lhs leading 2 mths)trend full-time employ (rhs)



mi exp chart pack aug 2013

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