Low interest rate makes business hungry for debt


Private sector credit grew by 0.3% in April, which saw the annual rate edge down to 6.1%. This is still close to the strongest in pace of growth in six years. 

Low interest rates have lifted the appetite for debt but not to previous highs. 

The pace of credit growth remains below its long-run average. Credit for investor housing grew at 10.4% over the year to April, the same annual pace as in the year to March. Annualised business credit grew 5.0% while personal credit expanded at just 0.6% for the year to April.

Share Markets:

Mixed reports on the progress of Greece's debt talks and soft US economic data dented investor sentiment. The Dow, the S&P 500 and the Nasdaq fell 0.6%.

In Europe, stockmarket losses were deeper, with the Euro Stoxx down 2.2% and the German Dax off 2.3% for the session.

These offshore losses bode poorly for the Australian stockmarket today, following healthy gains on Friday.

Interest Rates: 

US government bond yields edged slightly lower on softer US economic data.

This was despite a newswire Fed source story claiming a rate hike was still possible "mid-year" if the rest of Q2 economic data looks more promising.

Foreign Exchange:

The US dollar was mixed against the major currencies. EUR/USD emerged slightly stronger, at 1.0986, having mostly traded 1.0960-1.1000.

Greece's economy minister declared that it would be able to make the roughly €300mn payment to the IMF due Friday but the weekend press wasn't particularly upbeat. GBP/USD mostly chopped lower, steadying around 1.5290.

AUD/USD dipped to a low around 0.7632 as USD enjoyed some brief buying on the slightly better than consensus US GDP revision.

The Aussie then pushed back above 0.7660 before fading to 0.7648 at the time of writing. NZD/USD remained under pressure, extending its Asian session decline to 0.7088 before closing NY at 0.7107. This left AUD/NZD up about a cent over the day, at 1.0755.

USD/JPY recovered from a small dip on the Chicago PMI data to currently trade very near its highs, at 124.15, up from Asian lows near 123.60. Over the weekend there was a very strong earthquake off Japanese islands south of Tokyo but fortunately it was very deep, causing only a handful of injuries and service interruptions.


Commodity prices were mixed, with the oil price gaining on news of a larger than expected decline in the number of US oil rigs in operation, and as the recent rally in the US dollar took a breather.

The copper price, however, weakened, after softer economic data in the US raised concern about demand from the world's second largest copper consumer.


Japan's unemployment rate fell to 3.3% in April from 3.4% in March. There are now 1.17 jobs per applicant compared to 1.15 in March.

Japanese consumer price inflation in the year to April was 0.6%, down from 2.3% in the year to March. The sharp decline now means that the impact of the increase in sales tax that was introduced in April 2014 has now passed through.

Japanese industrial production rose 1.0% in the month of April to be down 0.1% over the year. Industrial production has been weak on an annualised basis for the past year despite the weakness of the yen.

Housing starts in Japan rose just 0.4% in the year to April. With a population growth rate of negative 0.1% (2014) there is little pressure to build new housing.

New Zealand:

Residential building approvals declined 1.7% in April following a 10.3% surge in March.  The trend in new housing is now flattening after solid growth from 2011 onwards with growth in the year to April of just 2.8%.

The number of approvals for apartments is at a 7 year high with the bulk located in Auckland. Apartment approvals are up 22.5% on a year earlier.

Business confidence in New Zealand fell in May according to a survey undertaken by ANZ. The survey of 1500 companies has fallen from a high of 70.8 in early 2014 down to 15.7 in the May 2015 reading.

While still positive, it suggests weaker economic growth in the year ahead.

United Kingdom:

Consumer confidence in the UK slipped from a reading of 4 in April to 1 in May. Readings above zero indicate that there are more optimists than pessimists among UK consumers.

This index turned positive during 2014 for the first time since the GFC with the March reading the highest in 10 years.

United States:

GDP fell 0.7% in annualised terms in Q1, which was slightly better than consensus expectations for a 0.9% decline. This is a downward revision to the earlier 'advance' GDP numbers, which reported an increase of 0.2% for Q1.

The stronger US dollar weighed on US economic growth in Q1, with the trade gap detracting the most from growth in 30 years. For the year to Q1, GDP rose 2.7%, up from 2.4% in the year to Q4.

Consumer sentiment rose to 90.7 for the final reading for May, according to the University of Michigan measure. This is up from an initially reported reading of 88.6 in May, but still down on April's reading of 95.9. This was the lowest reading since November 2014.

The Chicago PMI fell to 46.2 in May, from 52.3 in April, defying consensus expectations for an increase.