The Australian economy is slumping much faster than previously thought, but our trade performance continues to rebound as higher oil, gas, iron ore and coal export prices cascade through the trade account. Higher interest rates, falling consumer confidence, the stockmarket turmoil and the higher oil prices are forcing consumers to cut their spending in shops, businesses and on houses.

This is slowing the economy faster than the RBA had believed possible and means a rate cut could now come late this year if the sharp slump in retail sales (1% last month) and the continuing slide in building approvals, continues much longer. The RBA says it now sees the slowdown happening, after this week’s figures, and especially the bank’s own credit figures for June, its accelerating.

On top of this consumers slashed their spending in June with the annual growth in personal credit falling sharply as they cut back across the board. Only higher petrol prices are seeing more money spent on them, but that’s because of the price rises than any other factor. Retail sales slumped 1% in June from May, the biggest fall in six years, since 2002. That added to the downward momentum from falling building approvals and a further slowing in the growth in private credit in June.

Total credit provided to the private sector by financial intermediaries rose by 0.4% over June 2008, following a rise of 0.5% over May. Over the year to June, total credit rose by 11.7% according to the Reserve Bank figures, compared with the 13.3% growth rate in May. That’s the slowest growth rate for credit since 1997, according to preliminary figures and saw a further slowing in the growth of housing credit to 0.6%, the lowest monthly figure since 1996 and an annual growth rate of 9.9%, the lowest for more than a decade.

Personal credit contracted 0.4% in June from May’s 0.5% rise, cutting growth to just 4.1% in the year to June, more than half the annual 8.8% rate for the May year.

That backs up figures from the RBA last week of a fall in credit card transactions. Business lending rose in June by 0.5% compared to 0.3% in May, but the annual growth rate slowed further to 16.1% from 17.9%.

Retail sales fell 1.0% in June after a revised increase of 0.9% (0.7% originally) in May 2008 and a revised decrease of 0.4% (0.3% originally) in April 2008.

The ABS said that all industries except household good retailing (+0.8%) and hospitality and services (0.0%), saw a decrease in sales last month. The largest decreases were in department stores (-5.2% bad news for Myer and David Jones) and clothing and soft good retailing (-5.0% bad news for Just group, Target, Big W and Kmart).

The ABS said that in original terms, Australian turnover “decreased by 3.9% in June 2008 compared with May 2008. Chains and other large retailers decreased by 2.9%, while the estimate for ‘smaller’ retailers (the sampled units) decreased by 5.3%.Australian turnover increased by 1.9% in June 2008 compared with June 2007. Chains and other large retailers increased by 4.0%, while ‘smaller’ retailers decreased by 0.9%.”

But there was good news for the trade account where the second surplus in three months was reported today for June by the ABS. In seasonally adjusted terms, the balance on goods and services was a surplus of $411m in June 2008, a turnaround of $664m on a revised deficit in May 2008 of $253 million (that was originally put at just under $1 billion, itself a huge turnaround).

The ABS said the seasonally adjusted surplus was primarily due to the higher export prices for coking and thermal coal and iron ore. Seasonally adjusted, exports rose $454 million (+2%) to $23,049million. Non-rural and other goods rose $509 million (+3%) while rural goods fell $97million (-4%). Services credits rose $42 million (+1%). The rise in non-rural and other goods was driven by coal, coke and briquettes, which rose $657million (+21%).

Imports fell $210m (-1%) to $22,638 million, with intermediate and other goods falling 5% or $472 million as oil and petrol imports fell; while consumption goods 2% to $102 million. Capital goods imports rose 9% to $341million.