Retail trade, construction too soft-- RBA needs to cut

A veritable data-fest today. 

Let's start with the retail trade data, which came in very weak at only 0.1% growth seasonally adjusted.

"The seasonally adjusted estimate rose 0.1% in May 2013. This follows a fall of 0.1% in April 2013 and a fall of 0.6% in March 2013."

Hmm, not good.

So when the RBA was "bricking itself" in November about accelerating consumer activity (if indeed any bricking actually took place) it needn't have done.

Graph: Monthly Turnover, Current Prices, Trend Estimate

Source: ABS

Meanwhile, engineering construction activity fell by a seasonally adjusted 3.0% in the quarter. 

It's likely to be all downhill from here on in (with one exception: Queensland) as the capex boom unwinds. More central bank stimulus needed.

Graph: Value of work done, Chain volume measures

Source: ABS

Very little traction evident here, and that's just not good enough. 

The RBA needs to cut interest rates again, and soon.

Absent another collapse in the Aussie dollar in the next month or a seemingly unlikely spike in inflation this quarter, you can factor in another interest rate cut in August.

Today's data has seen futures markets pricing in a 57% chance of a cut on August 6, a leap from the 47% chance factored in yesterday.

As if to underscore the point, RBA Guv'nor Glenn Stevens stated that the RBA "deliberated for a very long time" about its last interest rate decision, implying that the decision to keep rates on hold was a close-run affair.

Was this just 'jawboning' or was he being fair dinkum? 

Hard to say, but it's amazing what just six simple words can do to the markets! 

The share markets shed a thumping 1.9% and the Aussie dollar plummeted to just 90.7 cents, a world away from the 106 cents plus of not so long ago.

Interest rate cut coming...

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