28 October 2002, 09:12  Australian Trade, Building Reports May Signal Economy Slowing

/www.bloomberg.com/ By Victoria Batchelor
Sydney, Oct. 27 (Bloomberg) -- Australia's economy may be slowing after growing about 4 percent the past year, analysts said, ahead of reports this week on trade, building approvals and retail sales in September.
The trade deficit for the month is expected to narrow to A$655 million ($364 million) from August's A$948 million shortfall as imports fall, according to the median of 21 economists surveyed by Bloomberg News. That may signal fewer consumer goods and capital equipment were imported. Exports, which account for a fifth of production, also may have fallen.
Economists have been scaling back expectations of further central bank interest-rate increases this year as consumer confidence wanes, a drought slashes farm production and slowing global growth cuts demand for metal exports. Just four of 22 economists surveyed on Friday expect a rate increase this year. A month ago, half the economists surveyed forecast higher borrowing costs.
``This round of reports might show some softening in domestic demand in Australia,'' said Tony Pearson, global head of market economics at National Australia Bank Ltd. ``We have now moved our expectations for a rate rise from December to the first quarter of 2003 -- the central bank's got time up its sleeve.''
The trade report will be released by the Australian Bureau of Statistics on Wednesday at 11:30 a.m., Sydney time. The building approvals number will be released the following day.
Building approvals are expected to have declined 13.5 percent in September from an eight-year high in August, according to the Bloomberg survey.
Retail Sales
Retail sales probably rose 0.6 percent in September, following a drop in July and a weaker-than-expected 0.2 percent gain in August. Retail sales, without adjusting for inflation, are expected to rise 0.5 percent in the third quarter, weaker than the 2.5 percent increase in the second quarter. The retail sales report will be released on Friday at 11:30 a.m. in Sydney.
Stronger retail sales and a boom in building have fueled economic growth this year. The economy expanded 3.8 percent in the second quarter from the same period a year earlier, almost twice the pace of U.S. growth in the same period.
The Reserve Bank of Australia raised its overnight cash target rate a half percentage point to 4.75 percent in two moves in May and June. It has kept interest rates unchanged the past four months, citing concerns about the global economic slowdown.
Rate Expectations
All 22 economists surveyed by Bloomberg News expect the central bank to leave its benchmark interest rate unchanged in November. The bank's rate-setting board meets November 5 and announces its decision the next day.
Four forecast a quarter point rate increase in December, 17 say rates will be kept unchanged and one expects a quarter point cut. The median expectation is for the benchmark rate to be increased to 5 percent by the end of the first quarter of 2003.
Still, while this week's reports may show a drop in imports and building approvals, it doesn't necessarily suggest the Australian economy is faltering, some analysts said.
``While imports and building approvals may be down in September, they are still at high levels overall,'' said Michael Blythe, chief economist at Commonwealth Bank of Australia. ``The overall impression is of a domestic economy still ticking along.''

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