Inflation remains front of mind for investors, economists and beleaguered Reserve Bank of Australia (RBA) decision-makers. In comforting news for all three of these groups, the Australian Bureau of Statistics (ABS) announced on 28 August 2024 that the monthly consumer price index (CPI) indicator rose 3.5% in the 12 months to July 2024. This is down from 3.8% in June.
The supply chain constraints which were exacerbated throughout the COVID-19 pandemic have recovered, which will slow the moderation of inflation in coming months. According to RBA forecasts, inflation is set to return to the 2 – 3% target range towards the end of 2025, and approach the midpoint in 2026.
Due, in part, to the recovering global supply chain and as noted in our recent July 2024 Trilogy Monthly Income Trust Investment Report, residential construction costs have stabilised. According to CoreLogic’s Cordell Construction Cost Index (CCCI), the FY2024 construction cost increase was 2.6%, marking the smallest annual growth rise since 2002.
Perhaps as a sign of this cost stabilisation, building permit approvals in July were just shy of 14,800 – the highest monthly total in over a year. This is a significant bounce-back after the 6.5% month-on-month decline to 13,237 in June.
And so, with inflation tracking in the right direction, it’s a matter of when, not if, the RBA will commence cutting the cash rate. And ‘when?’ really depends on who you ask. CBA continues to entertain the possibility of a November 2024 rate cut, while Westpac economists now believe November 2024 is unlikely, and are reviewing their forecasts. ANZ forecasts February 2025 for the first cut. NAB is less optimistic with their May 2025 prediction, but acknowledge it could come earlier.
The RBA, off the back of some hard lessons learned throughout the pandemic, has been tight-lipped as to when they may pull the trigger and reduce the cash rate.
View the key macro-economic indicators from August 2024:
Key economic data
- Official cash rate: 4.35%
- Monthly CPI indicator: 3.5% p.a. (3.8% p.a. in month prior)
Consumer sentiment
- Housing credit MoM: 0.5% (0.4% in prior month)
- Private sector credit MoM: 0.5% (0.6% in prior month)
- Retail sales MoM: 0% (0.5% in prior month)
Housing and construction
- Home loans MoM: 2.9% (1.0% in prior month)
- Investment lending for homes: 5.4% (2.7% in prior month)
- Building permits MoM prel: 10.4% (-6.4% in prior month)
- CoreLogic dwelling prices MoM: 0.5% (0.3% in prior month)
- Private house approvals MoM prel: 0.6% (-0.5% in prior month)
Labour market
- Unemployment rate: 4.2% (4.1% in prior month)
- Participation rate: 67.1% (66.9% in prior month)
The Trilogy Industrial Property Trust in the spotlight
Industry veteran Laurence Parisi has wasted no time in shining a spotlight on the Trilogy Industrial Property Trust (Trust) and the broader sector since joining Trilogy Funds in mid-July.
As the new Fund Manager of the Trust, Laurence has been on a media tour, outlining what he believes is driving opportunities in industrial property, as well as the factors that make the sector stand out from the rest. Laurence also sat down with The Golden Times for a series of video interviews, touching on topics such as finding the industrial property sweet spot, risk management and sector tailwinds.
This comes as the Trust continues the due diligence process for its blue-chip acquisition opportunity in the Northern Geelong industrial precinct. As mentioned in our last update, the property spans 3.8 hectares and includes two warehouses / offices, and sits directly opposite the Port of Geelong.
The tenants, UG Manufacturing Co Pty Ltd, trade as iconic Australian brand, Quiksilver. We believe this opportunity will innately enhance the Trust’s portfolio.
Related Articles:
This article is issued by Trilogy Funds Management Limited ABN 59 080 383 679 AFSL 261425 (Trilogy Funds) as responsible entity for the management investment schemes mentioned in this article. Application for investment can only be made on the application form accompanying the relevant Product Disclosure Statement (PDS) and by considering the Target Market Determination (TMD) available at www.trilogyfunds.com.au. The PDS contain full details of the terms and conditions of investment and should be read in full, particularly the risk section prior to lodging any application or making a further investment, together with the TMD. All investments, including those with Trilogy Funds, involve risk which can lead to no or lower than expected returns, or a loss of part or all of your capital. Trilogy Funds is licensed to provide only general financial product advice about its products and therefore recommends you seek personal advice on the suitability of this investment to your objectives, financial situation and needs from a licensed financial adviser. Investments with Trilogy are not bank deposits and are not government guaranteed. Past performance is not a reliable indicator of future performance.
