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Craig James – Chief Economist (Author) – CommSec

Reserve Bank Board minutes and wage data in focus

·         After a busy fortnight, there are only a few economic or financial events to watch in Australia in the coming week.

·         The week kicks off in Australia on Monday with the October data on new vehicle sales from the Australian Bureau of Statistics (ABS). The original sales data has already been issued by the Federal Chamber of Automotive Industries. The ABS merely republishes the data in seasonally adjusted and trend terms. The data will confirm that new vehicle sales were at record highs in the year to October.

·         On Tuesday, the Reserve Bank issues minutes of the Board meeting held on November 3. No doubt there was keen discussion on interest rate settings in the wake of rate hikes by Australian banks. While the Reserve Bank Governor has already talked about the issue and it has been covered by the Statement on Monetary Policy, investors are always on the look-out for further insights.

·         Also on Tuesday the weekly ANZ/Roy Morgan consumer confidence survey is released.

·         On Wednesday the ABS issues the wage cost index – the main measure of wages in Australia. We expect that wages rose by 0.6 per cent in the September quarter with the annual rate unchanged at 2.3 per cent – the slowest pace of growth since the series began in 1997.

·         Also released on Wednesday is data on imports of goods – a timely measure of spending in the economy – and the leading index. And Reserve Bank Assistant Governor (Financial Markets) Guy Debelle, speaks at the Bloomberg Summit.

·         On Thursday detailed employment data is published including geographic and demographic details on indicators like jobless rates.

·        And on Friday the ABS will issue the State Accounts for 2014/15 – an historical record of the economic performances of state and territory economies last financial year.

Mixed offerings in the US

·         There is a mix of ‘top shelf’ and ‘second tier’ indicators in the US over the coming week.

·         The week kicks off on in the US Monday with the Empire State manufacturing survey.

·         On Tuesday the focus in the US will be on monthly inflation data (consumer prices) as well as industrial production. The Federal Reserve is closely watching all the economic indicators to determine if rates should be lifted in December. But if inflation remains well contained, it reduces the urgency for a move next month. Economists tip a 0.2 per cent lift in the core measure (excludes food and energy), keeping annual inflation near 1.9-2.0 per cent. A modest 0.1 per cent lift in production is also expected.

·         Also on Tuesday, data on capital flows is expected in the US together with the usual weekly data on chain store sales.

·         On Wednesday in China, the October figures on house prices are released. In the year to September house prices were down 0.9 per cent.

·         On Wednesday in the US, the Federal Reserve releases minutes from the last policymaking meeting held on October 28. Analysts will be going through the report with a fine-toothed comb for assurance that rates are set to rise at the December meeting.

·         Also on Wednesday, the October data on housing starts is released together with the usual weekly report on mortgage transactions – purchases and refinancing. Economists are tipping a 3.4 per cent retracement in housing starts after the hefty 6.5 per cent increase in September.

·         On Thursday the leading index is released together with the influential Philadelphia Federal Reserve survey and the usual weekly data on claims for unemployment insurance. Economists tip an encouraging 0.4 per cent lift in the leading index while the Philly Fed index is expected to improve from -4.5 points to 0.5 points.

·         On Friday, the only data of note is the Kansas City Federal Reserve manufacturing index.

Sharemarkets, interest rates, commodities & currencies

·         At face value, it hasn’t been a great year for Australian shares with the ASX 200 index down by around 5 per cent over 2015. But while the broader market is down, a number of industries and sectors of the market have actually performed well. It has been the larger resource stocks that have done badly, reflecting lower commodity prices. But the Small Ordinaries index is up around 2 per cent with the MidCap50 up 6 per cent.

·         Across 20 industry sub-sectors, 12 of the sectors are currently up on the year. Leading the way is the Autos & components sector (up 30 per cent) with Transportation up 28 per cent, Diversified Financials up 27 per cent and Utilities up 15 per cent.

·         Leading the declines is Energy, down 25 per cent, Food & staples retailing, down 15 per cent, with both the Banks and Materials down around 12.5 per cent. Media and Telecom sectors are also amongst the losers over 2015.

·         Interestingly, despite the ASX200 being down 5 per cent over 2015 and the All Ordinaries down 4 per cent, market capitalisation is flat, reflecting capital raisings.