Pete Wargent blogspot

Co-founder & CEO of AllenWargent property buyers agents, offices in Brisbane (Riverside) & Sydney (Martin Place) - clients include hedge funds, resi funds & private investors.

4 x finance/investment author - 'Get a Financial Grip: a simple plan for financial freedom’ (2012) rated Top 10 finance books by Money Magazine & Dymocks.

"Unfortunately so much commentary is self-serving or sensationalist. Pete Wargent shines through with his clear, sober & dispassionate analysis of the housing market, which is so valuable. Pete drills into the facts & unlocks the details that others gloss over in their rush to get a headline. On housing Pete is a must read, must follow - he is one of the better property analysts in Australia" - Stephen Koukoulas, MD of Market Economics, former Senior Economics Adviser to Prime Minister Gillard.

"Pete Wargent is one of Australia's brightest financial minds - a must-follow for articulate, accurate & in-depth analysis." - David Scutt, Business Insider, leading Australian market analyst.

"I've been investing for over 40 years & read nearly every investment book ever written yet I still learned new concepts in his books. Pete Wargent is one of Australia's finest young financial commentators." - Michael Yardney, Australia's leading property expert, Amazon #1 best-selling author.

"Blog is great - loads of good data and charts. If you follow Australia, follow Pete Wargent" - Jonathan Tepper, Variant Perception, Global Macroeconomic Research.

"Pete's daily analysis is unputdownable" - Dr. Chris Caton, Chief Economist, BT Financial.

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Saturday, 3 December 2016

Weekend reads: Must see articles of the week

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Friday, 2 December 2016

Retail delivers again

Retail improves

The third quarter of 2016 was pretty much a write-off for economic growth in Australia.

The fourth quarter seems to have gotten off to a brighter start, with retail turnover increasing by +0.5 per cent to a record $25.6 billion. 

This follows on from a +0.6 per cent increase in September, so things appear to be looking up. 

Total industry retail turnover was up by +3.5 per cent over the year to October.

Queensland upgrade

Queensland had seen some unusual looking results in recent months, but retail turnover bounced back to increase by +0.8 per cent in October. 

With the exception of South Australia, all states saw an increase in turnover in the month. 

Year-on-year retail turnover growth in Queensland is now the second strongest in the nation, with all states and territories now in the black. 

Nowhere can touch the Australian Capital Territory, though, where annual growth has surged to +8.3 per cent (see here for why)


While department stores are hurting, cafes, restaurants and takeaways have seen turnover rise inexorably, up by another +7.3 per cent over the year to October. 

The sector now accounts for a seventh of total retail turnover on the ABS series, an unprecedented high. 

The wrap

Back-to-back strong reports for retail trade, suggesting that consumption in the economy could experience a reasonably good run-in to Christmas.



Greetings again, pop pickers.

Fans of bubbles and speculative orgies will find some reasonable amusement in this. 

The Reserve Bank of Australia's Index of Commodity Prices has seared +32.1 per cent higher than a year ago, thanks to surging iron ore and coking coal prices. 

Of course, the index is prepared on a monthly average basis using preliminary estimates.

When using spot prices for the bulk commodities (see the red dotted line) the index has gone absolutely ballistic, up by +15.6 per cent in November alone to be up by +61.9 per cent over the year.

Similar results in Aussie dollar terms, although movements in the currency have helped to smooth the journey through the mining boom to some extent. 

As for the bulk commodities index itself, using spot prices the index has increased by an outlandish +145.1 per cent since November. 

Quality forecasting!

It's partly valid to note that Australia hasn't benefited much yet from the explosion in prices, which may only be temporary, yet coal contracts have been signed at up to ~$300/t FOB (something which was basically unthinkable at the end of last year). 

It's not only the bulks that have been on a tear, a number of metals such as zinc have hit multi-year highs, with the base metals index up +26.7 per cent since January.

The oil price has also soared over the past 48 hours on OPEC cuts, getting December off to a flier. 

Of the main commodities in the index, only gold has been struggling lately. 

There's one other commodity that isn't officially captured in this index yet Australia nevertheless seems to have in abundance at times when it really needs it: luck! 


Listings down 4.2pc (Melbourne asking prices up)

Lower stock levels than last year

Listings ticked a little higher in November, but nationally have sunk -4.2 per cent lower than a year ago, according to SQM Research

Although Melbourne has he highest number of listings at 36,868, this hasn't stopped asking prices for houses driving some +13.4 per cent higher over the past year. 

Asking prices for units in Melbourne have increased by +5.2 per cent over the year to November. 

Stock levels were down from a year ago in Melbourne (-10 per cent), Sydney (-3.8 per cent), Hobart (-12.6 per cent), Canberra (-2.5 per cent), and Adelaide (-6.2 per cent). 

Note that this is another data series suggesting that Darwin is turning a corner, it being the only capital city to record a monthly decline in listings.

The tightest market over the past year has been Hobart, with stock levels well down.

However, listings in the Tasmanian capital jumped by +7 per cent in November as vendors look to cash in on rising prices. 

Listings also jumped by +5.9 per cent in Canberra in the month, perhaps a sign of things to come in the nation's capital with an unprecedented number of apartments under construction in the city. 

Thursday, 1 December 2016

Q3 wipeout (mining capex obliterated)

Q3 wipeout

Statistically if you print out a long line of numbers, even if the trend is increasing, sooner or later you will get a number that is smaller than the one for the prior period.

Step forward Australian GDP, it looks as though your time has finally come! 

On the back of some other weak numbers, including for construction, today's Private New Capex figures more or less assured that the economy didn't grow in any meaningful way in the third quarter of 2016.

Total capital expenditure fell by -4 per cent to $28 billion to be -13.7 per cent lower than a year ago.

No prizes for guessing that it was the mining industry's woes that accounted for the drop.

Mining capex has dropped by -35 per cent over the past year to be -59 per cent below its 2012 peak.

Unfortunately manufacturing has been going nowhere fast either, with capex meandering moderately lower over the past year (although the PMI gauge has at least now turned positive). 

Capital investment in other industries has been rising - which is great news for the capital cities - but is clearly struggling to pick up the slack! 

Quarterly results have been steadily improving in the two largest states thanks to the standout economies of Sydney and Melbourne. 

In fact, actual capital expenditure in NSW has moved +19 per cent higher than in the September quarter of 2015.

Meanwhile Queensland has now taken its medicine and at last saw capex rising again in Q3. 

Western Australia is still working through its painful adjustment, however, with capex down by a thumping -38 per cent over the year. 

This mirrors what we saw in the construction figures with a number of WA's mega projects now transitioning to the production phase. 

Looking ahead to next year the fourth estimate for 2016-17 total capex increased marginally to $107 billion, but this was a miss on expectations. 

Note that with actual capex now tracking at ~$28 billion per quarter, we are now getting pretty close to the bottom. 

The wrap

Overall this was another soft result, and when you mix it in with weak construction and net exports, it looks as though Australia's economy will record a flat or negative result for the third quarter (unless the economy can pull something unexpected out of the hat, as it sometimes does - public investment, consumption, and inventories being the key candidates). 

Even with inflation below the target range, markets don't want to believe that rates will fall any further, preferring to note that at least the end of the downturn is in sight. 

Looking on the positive side, capex is now rising again in Queensland, with the Sunshine State having taken most of its pain betweeen mid-2013 to early 2016, while Western Australia is at least getting relatively close to the nadir now. 

In fact, the expectations for total capex show that the bottom will be in soon enough.

It's just that we have a bit more pain to go before the mining cliff is finally behind us.