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Savanth Sebastian – Economist – CommSec

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A quiet week ahead in Australia

·       Another holiday-shortened week lies ahead (Easter Monday holiday). There are few highlights in Australia – certainly few indicators that are regarded as ‘top shelf indicators’.

·       In Australia, the week kicks off on Wednesday with ANZ and Roy Morgan issuing the weekly consumer sentiment reading. The higher Australian dollar, relatively low petrol prices and a firmer sharemarket are serving to underpin confidence levels.

·       Also on Wednesday, the Bureau of Statistics (ABS) releases two demographic publications – Migration and Regional Population Statistics, both for the 2014/15 year. The data provides further detail and perspectives on population growth – important for most businesses.

·       In addition, the ABS also releases on Wednesday more detailed data on engineering construction for the December quarter. Most analysts are interested in how the mining downturn is fleshing out and any signs of pickup in non-building construction outside mining areas.

·       On Thursday, the ABS releases data on job vacancies – one of the key leading indicators of the job market. Recent data suggests a pause in hiring activity after solid growth in mid-2015.

·       Also on Thursday the Reserve Bank releases the latest Financial Aggregates publication. Most focus is on private sector credit (largely loans outstanding by financial companies). Although the seemingly-forgotten monetary indicators – M3 and Broad Money – are also issued. Credit probably grew by 0.5 per cent in the month and by 6.5 per cent over the year.

·       And on Friday, the Australian Industry Group releases the key activity gauge on the manufacturing sector – the Performance of Manufacturing index. The PMI was at 5½-year highs in February and has been in expansion territory (index above 50) for eight months.

·       Also on Friday CoreLogic and RP Data release the March reading on home prices – the most highly-regarded measure of its type. The daily series shows that home prices have lifted in all capital cities except Brisbane, and nationally home prices probably rose 0.5 per cent in the month to be up 7 per cent over the year.

US economic data dump

·       While quiet in Australia, there is plenty to watch overseas – notably the US jobs data on Friday.

·       The week kicks off on Monday with a number of indicators for release in the US. The “advance” reading of the trade deficit is issued with personal income & consumption, pending home sales data and the Markit “flash” reading on the services sector. The personal income and consumption data will include the latest estimate of the Federal Reserve’s key inflation indicator – the core personal consumption deflator.

·       On Tuesday in the US, consumer confidence data is released with the CaseShiller measure of home prices. The usual weekly chain store sales figures are also issued. Analysts tip a lift in consumer confidence from 92.2 to 94.0. And home prices may have lifted by 0.7 per cent in January to stand 5.7 per cent higher than a year ago.

·       On Wednesday the usual weekly data on home purchase and refinancing is issued with the ADP survey of private sector payrolls. Economists tip a 190,000 lift in job numbers, only slightly lower than the February result.

·       On Thursday, the usual weekly data on claims for unemployment insurance is released together with the influential Chicago purchasing managers index and Challenger job layoffs series.

·       And on Friday in the US, the all-important monthly jobs report is issued. Main interest is in job numbers – in particular, the change in non-farm payrolls. And economists expect that 200,000 jobs were created in March, down from 242,000 in February. The unemployment rate may have held steady at 4.9 per cent with average earnings (wages) up 0.2 per cent. The wage reading is important. Higher wages infer higher inflation and higher interest rates.

·       Also on Friday, consumer sentiment, construction spending and car sales data are released with the ISM manufacturing reading. In China, purchasing manager surveys for manufacturing and services are due.

Sharemarket, interest rates, currencies & commodities

·       To say that global sharemarkets have had a mixed start in 2016, borders on understatement. Of 73 sharemarkets monitored by CommSec, so far this year 37 of the bourses are lower with the remaining 36 markets up from the end December levels of 2015. Best performers are in South America with Peru up almost 23 per cent and Brazil up 18 per cent. At the other end of the scale the Chinese market is down around 15 per cent. The Australian market is in 43rd spot, down near 2 per cent.

·       In terms of currencies, CommSec has monitored 120 cross-rates against the US dollar with 57 higher, 30 largely unchanged and 33 currencies weaker against the greenback.

·       “Commodity currencies” lead the gains, such as those from Canada, Norway, Australia and Brazil. The Brazilian real is up near 9 per cent with the Russian rouble up 7 per cent. The Australian dollar is the 12th strongest currency, up around 4 per cent against the greenback.

·       The weakest currency is the Venezuelan bolivar, down 59 per cent, courtesy of a devaluation on March 8.

 

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