Hunter business performance is at its lowest level in five years as falling house prices, global shockwaves and weaker consumer sentiment bite into the regional economy.
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Economist Anthea Bill will tell a Hunter Research Foundation Centre breakfast on Friday morning that business performance "softened significantly" in the Hunter in the first half of 2019.
Dr Bill's latest HRFC report on the Hunter economy shows house prices dropped 8 per cent in the Newcastle council area in the 12 months to March and 3.8 per cent across the region.
The Newcastle Herald has reported separate data showing those falls continued in the June quarter and totalled 10 per cent for the financial year in Newcastle before rising slightly in July.
"All eyes are on the housing market in Sydney and Melbourne," Dr Bill said.
"Last month was a slight increase, but has it reached its bottom and started to improve? It's too early to say."
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The HRFC business performance index, based on a survey of trading, profitability and hiring at 300 Hunter companies in the June quarter, is at its lowest ebb since September 2014, although business owners' confidence in the next 12 months has risen slightly.
"We've seen for the first time in some recent quarters a bit of a jump in the number of businesses indicating that their main business constraint is a lack of sales and orders," Dr Bill told the Newcastle Herald on Thursday.
"The household sector has been relatively subdued post-GFC. It's not really recovered that much."
She said the fall in house prices was driving down consumer spending because "so much of household wealth in Australia is tied up in housing".
"Households feel less wealthy. When the price gains on paper are going down, they don't buy a new car.
"Indeed, the sale of new cars has fallen significantly over the last year."
The report says consumer spending fell in the Hunter in the first half of the year and predicted consumer spending for the short-term softened to sit below the five-year average for June.
National figures issued last month showed a drop in discretionary spending on non-essentials such as furniture, eating out and recreation.
The Hunter's jobless rate grew slightly, from 4.4 to 4.7 per cent, in the six months to May, almost the same as the NSW-wide figure of 4.5 per cent.
The Hunter economy grew 11,300 jobs in the same period, but many of these were part-time. The jobs growth also drew more people into the workforce, adding to the unemployment rate.
Dr Bill said the jobless rate was "historically low" for the Hunter, but analysts predicted it had bottomed out and was "starting to tick up a bit".
"Looking at hiring intentions and vacancies suggests jobs growth is going to slow, and that is in our data as well, a little bit."
The HRFC report also highlighted a 36 per cent drop in thermal coal prices, from $163 to $104 a tonne, in the year to May.
Dr Bill said this fall, one of several international "risks" buffeting the Australian economy at an inopportune time, would be "changing the profitability of the operations in the Upper Hunter".
Asked whether the latest data supported the narrative that Australia was heading for a recession, Dr Bill said: "Yes. I've tried to avoid anything too dire, but certainly the global environment isn't helping. The IMF has downgraded its growth forecasts, China's having some problems with its domestic demand."