Data released today showed that credit growth for owner occupied housing continues to contract, the number of loans for owner occupied homes excluding refinancings fell a seasonally adjusted -4.9% in June and represents the fifth straight month of falls. On a year over year basis they are now down -30% to levels not seen since October 2001. Whilst the total value of owner occupied home loans is down -29% year over year.
A slowdown in the Australian economy is in doubt now, the question is shifted to the severity of the slowdown. In the space of a week we have had two reports showing that both the Australian Manufacturing and Services sectors contracting for the second straight month. Today, the Performance of Services Index report for July showed that the Construction industry has been contracting for 4 straight months.
The graph above shows a sharp slowdown in construction activity and coupled with a contracting services and manufacturing sector, sluggish retail sales, contracting credit and falling business and consumer confidence, the Australian economy appears to be slowing sharply.
I would expect in the coming months that we will start to see employment losses and the unemployment rate start to tick upwards. Whilst the US has experienced somewhat of a slow-motion slowdown, Australia's slowdown appears to be happening more rapidly. The Australian Treasurer may say that talk of recession is silly at this point, but that talk will only get louder in the months ahead.