Craig James – Chief Economist – CommSec
Chinese economic data the highlight
· A mixed bag of Australian economic indicators is scheduled over the coming week including gauges of inflation and consumer confidence and lending.
· The week kicks off on Monday with the release of the monthly inflation gauge and new vehicle sales data.
· The monthly inflation gauge should confirm inflationary pressures are contained with headline inflation still below 2 per cent.
· The new vehicle sales data is the Bureau of Statistics’ (ABS) take on the industry data that has already been released. Vehicle sales stood at record highs in the year to December.
· On Tuesday, the ABS releases data on both the imports of goods as well as lending finance. Sadly the December publication on imports is the last to be published.
· The lending finance data shows the value of new loans taken out across housing, personal, lease and business loan categories. In October, total new loans eased from 7½-year highs, down by 0.7 per cent to $74.6 billion.
· Also on Tuesday, the ANZ/Roy Morgan consumer sentiment survey is released. Recent declines in the Aussie dollar and sharemarket have dented consumer optimism.
· On Wednesday the ABS releases the Building Activity publication for the December quarter. Not only does the data show the work done on commercial building, it also includes figures on the commencement of work on new houses and apartments – the next stage of the housing pipeline after building approval (approval by local councils). Starts fell by 3.2 per cent in the June quarter.
· Also on Wednesday, Westpac and the Melbourne Institute provide the monthly variant of consumer confidence. Confidence levels have been up and down over the past month but the monthly survey will be based on interviews conducted over the weekend of January 16-17.
· On Thursday the ABS releases detailed job market data include dissections of data on a regional or demographic basis. And on the same day the Housing Industry Association will release the data on new home sales for November.
Chinese economic growth in focus
· Chinese economic data dominates the early part of the week while US economic data is a mixed bag of leading indicators and surveys and data on housing activity.
· The week kicks off in China on Monday with the release of home price data for December. Prices are up 0.9 per cent over the year.
· On Tuesday, China releases economic growth data for the December quarter as well as activity data for the December month. Economists expect that the economy grew 6.8 per cent in the year to December.
· After a holiday on Monday, in the US the week kicks off on Tuesday with the Housing Market index, data on capital flows and the usual weekly data on chain store sales.
· On Wednesday the all-important data on consumer prices is released – timely, given that the figures are one week out from the first Federal Reserve meeting of 2016. Core (underlying) inflation is up 2 per cent over the year. Data on housing starts is also released on Wednesday with weekly mortgage data.
· On Thursday the influential Philadelphia Federal Reserve survey is issued together with the weekly data on new claims for unemployment insurance (jobless claims).
· And on Friday the leading index is released together with data on existing home sales. The leading index may have lifted 0.2 per cent in December while existing home sales may have clawed back 9 per cent of the 10.5 per cent lost in November. The “flash”, or preliminary purchasing manager indexes for January are released in the US and Europe.
Sharemarkets, interest rates, exchange rates and commodities
· The US earnings season cranks up a notch over the coming week with around 130 companies scheduled to report. On Tuesday, earnings are expected from Bank of America, Morgan Stanley, IBM, Advanced Micro Devices and Netflix.
· On Wednesday, 27 companies are scheduled to report their results including Goldman Sachs.
· On Thursday as many as 63 companies are to report. Included are Travelers, ResMed, E*TRADE, American Express and Verizon. And on Friday General Electric is amongst those to report.
· Commodity prices are largely in retreat. But the CRB Textiles index (cotton, wool, print cotton & burlap) has been a rare exception. Since the lows in late September, the CRB Textiles index has lifted by around 4 per cent. In good news for the Australian economy, the wool price is up 19 per cent over the year with cotton up around 1 per cent.