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Australian Economy This week

Business Inventories - Business inventories in Australia increased by 0.7 percent quarter-on-quarter in the three months to March of 2018, following a 0.2 percent gain in the previous period and far above market expectations of 0.1 percent. It is the highest reading since the first quarter 2017, as inventories picked up for manufacturing and rebounded strongly for wholesale trade. In addition, inventories continued to grow for electricity, gas, water & waste services. In contrast, inventories fell further for retail trade, accommodation and food services, and tumbled for mining, reports TradingEconomics;

Company Gross Profits
- Australian companies doled out a record amount in salaries last quarter, providing support for a struggling consumer sector while a jump in profits pointed to economic growth gathering pace after last year’s slowdown. Stronger-than-expected data released on Monday suggested first-quarter economic growth might be faster than current consensus forecasts, sending the Australian dollar AUD=D4 up a third of a U.S. cent to the day's high of $0.7615;

ANZ Job Advertisements
- According to ANZ Bank, Australian job ads rebounded strongly last month, pointing to the likelihood that hiring may pickup, rather than slow further, in the months ahead. After seasonal adjustments, it said that advertisements jumped by 1.5% to 179,245 in May, completely reversing all of the weakness, and more, seen in the prior three months. “Job ads eased slightly [between February to April] alongside a loss of momentum in employment,” said David Plank, Head of Australian Economic at ANZ Bank, referring to a 0.7% drop in advertisements over that period. “It is therefore quite encouraging to see job ads recover solidly in May to make a new high in the current uptrend”;

Retail Sales
- Retail trade in Australia rose by 0.4 percent month-on-month in April of 2018, compared to a flat reading in a month earlier. Figure was well above market consensus of a 0.2 percent gain, led by higher sales in cafes, restaurants and takeaways, as warmer weather encouraged people to eat out, reports Trading Economics;

RBA - The Reserve Bank of Australia is expected to keep rates unchanged at 1.5% (paywall) because of stagnant wages and low inflation. But inflation is picking up in other places, like the Philippines, which is due to publish new pricing data.

AIG Manufacturing Index - The Australian Industry Group Australian Performance of Manufacturing Index eased by 0.8 points to 57.5 points in May, indicating a 20th month of continuous growth, albeit at a slightly slower rate (seasonally adjusted). Sales levels were stable in May (50.4 points), while finished stocks contracted (47.0 points), as manufacturers drew down on inventories. The new orders sub-index remained above 60 points, indicating healthy demand and a strong likelihood of further near-term growth. Sub-sectors that provide manufactured goods for large transport projects and the construction sector continue to report very strong levels of activity, particularly from the eastern states (albeit slowing from very high levels earlier in 2018);

Corelogic Auction Data - Tighter lending takes toll on the market The Sydney housing market has dropped close to an auction clearance rate of 50 per cent, among its lowest points since before the most recent boom began, as it continues to grapple with tighter lending standards and weaker supply and demand. The city’s auction clearance rate closed at a preliminary 52.3 per cent at the weekend. Melbourne’s market, meanwhile, proved more resilient, with a clearance rate of 61.6 per cent, although both were lower than comparable weekends in the previous year, Corelogic data shows. Sydney’s rate is likely to come down further, to around 47-49 per cent, when final results are collected this week, agents and experts say. Sydney’s average house prices have now fallen 4.1 per cent for the year to May, while Melbourne’s have posted subdued growth of 2.2 per cent in the year to date, compared with galloping double-digit growth during the boom of 2012-17;

Building Permits - Building permits in Australia dropped by 5 percent month-in-month in April of 2018, following an upwardly revised 3.5 percent rise in the previous month and worse than market consensus of a 3 percent fall. The decline was mainly due to a slump in the approval of private sector dwellings excluding houses (-11.5 percent from 7.6 percent in March). Meantime, building permits for private houses increased by 0.1 percent, compared to a 1.6 percent gain in a month earlier. The overall picture is of a housing construction industry that continues to invest in permits for new projects;