British growth lost pace; cheaper energy lowered inflation in Statistics Sweden's data. In Australia, restrictive monetary policy is working through housing and private demand.
Economics & Markets··Midday
Services carried British growth
The British economy grew 0.4 per cent from April to June, slowing from 0.6 per cent in the first quarter. Output was 1.2 per cent higher than a year earlier, while real GDP per head rose 0.4 per cent over the quarter and 1.0 per cent over the year. Services carried most of the expansion, growing 0.5 per cent. Construction added 0.3 per cent, but production was flat. The monthly path suggests some improvement at the end of the quarter: the economy contracted 0.1 per cent in April, did not grow in May and expanded 0.3 per cent in June. The Office for National Statistics revised May down from an earlier estimate of 0.1 per cent growth and cautioned that early estimates are routinely revised. The result is continued aggregate growth with an uneven sectoral burden: services and construction moved forward while production contributed nothing. The rise in output per head also shows that the headline gain was not solely a consequence of population growth.[1]
Cheaper energy changed Sweden's reading
Swedish consumer prices were 0.2 per cent higher in July than a year earlier, down from 0.7 per cent in June. The fixed-interest CPIF measure also slowed, from 1.3 per cent to 0.7 per cent. Prices fell 0.3 per cent between June and July; in the same period last year they rose 0.2 per cent. Energy drove much of the change. Electricity prices dropped 12 per cent during the month and fuel fell 10 per cent. Public transport and childcare also became cheaper. Moving the other way, package holidays and car rentals increased with their usual summer pattern, while electronics rose 7 per cent, led by computers. CPIF excluding energy stood at 0.6 per cent over the year. That indicates that the low headline rate was not confined to one price group, although the energy fall clearly pulled the total down. For household budgets, relief appeared in electricity, fuel, transport and care, while holidays and electronics followed a different path.[2]
Australia's restraint runs through housing
The Reserve Bank of Australia judges monetary policy to be somewhat restrictive. Assistant Governor Christopher Kent said the cash rate was near the top of the range of central estimates for neutral. Housing prices are falling in Sydney and Melbourne, and the declines are becoming more broadly based. Kent attributed part of that move to recent rate increases and part to a pullback after a long and powerful rise. Lending and deposit rates have moved with the cash rate, showing how restraint is reaching households through the banking system. Scheduled mortgage payments are close to their 2024 peak. The bank expects growth in private demand to moderate over the rest of the year and regards that path as necessary to return inflation to target. Service-led British growth and Sweden's energy-driven fall in prices offer a more comfortable picture, while policy transmission in Australia still depends on cooling demand. Housing values and mortgage payments are the two most visible channels for households.[3]
