Craig James – Chief Economist – CommSec


New month, new quarter

·       The Reserve Bank dominates the economic calendar in the coming week. The Reserve Bank Board meets on Tuesday, while the data to watch includes retail trade and job advertisements, due out on Monday. In the US, the focus is on the minutes of the March Federal Reserve meeting, released on Wednesday. And in China, Europe and the US the services sector purchasing manager indexes will be watched closely.

·       In Australia, the week kicks off on Monday with four data releases. Melbourne Institute releases the monthly inflation survey, while the ANZ job advertisements series is also slated for release. In addition the Australian Bureau of Statistics (ABS) will release figures on retail trade and building approvals.

·       Consumer spending certainly lifted over the tail end of 2015, providing a boost to December quarter economic growth. In addition retail trade rose by 0.3 per cent in January and we expect that retail trade lifted further in February, gaining 0.5 per cent.

·       Building approvals have been volatile, over the past few months. Dwelling approvals fell by 7.5 per cent in January, driven by a 9.1 per cent fall in apartment approvals. Over the past year 231,752 new homes were approved, easing further from the record high 237,242 in the year to October 2015. Clearly a modest consolidation is taking place.

·       Also on Monday, ANZ issues its job advertisements report for March and on the following day teams up with Roy Morgan to issue the weekly consumer confidence data. Given the sizeable amount of hiring that took place over 2015 it is understandable that employment has eased modestly over the past couple of months. Importantly the labour market remains in good shape. The trend job advertisements series has been rising for 27 straight months.

·       The consumer confidence results have been decidedly more optimistic in the past couple of weeks – particularly when it comes to the outlook for family finances over the next 12 months. However confidence may be more volatile in coming months as a Federal Budget and possible double-dissolution election adds uncertainty.

·       The Reserve Bank Board meeting on Tuesday should be treated as a dead rubber. Rates are unlikely to move in any direction over the next couple of months. Recent commentary from the Reserve Bank makes it clear that while there is an “implicit” easing bias, the focus is on getting better readings on timely economic data.

·       Interestingly the statement following the interest rate decision will be closely scrutinised for any views on the Australian dollar. Despite recent comments for a lower Aussie dollar, the Reserve Bank may have more to say given the currency is comfortably holding above US76 cents.

·        Overall, we don’t expect the Reserve Bank to shift rates over the rest of 2016. Inflation remains well contained but stronger activity and growth should result in the Reserve Bank keeping its powder dry.

·       Also on Tuesday, data on international trade is issued with the Performance of Services index and new car sales figures for March.

·       On Wednesday, Reserve Bank Assistant Governor Christopher Kent (economics) delivers a speech at the Reserve Bank in Sydney titled “Economic Forecasting at the Reserve Bank of Australia” (AEST 5pm).

·       On Thursday, data on tourist arrivals is released. Interestingly tourists to Australia from mainland China have lifted to record highs. Tourists from China and Hong Kong combined exceeded 1.3 million in the past year, up almost 24 per cent over the year and closing fast on the 1.32 million visitors from New Zealand.

A quiet week ahead in the US

·       It’s not often that you can say it – but a relatively quiet week lies ahead in the US. And the focus across China and Europe is likely to be the services sector purchasing managers indexes (PMIs) released on Monday and Tuesday. There are also five Federal Reserve policymakers scheduled to speak over the week.

·       On Monday data on factory orders and the regional ISM New York survey are released. Economists expect factory orders to have eased by around 2 per cent in February while the New York ISM survey should continue to show a healthy expansion. Also the final revisions on durable goods orders – proxy for business investment – for February are released.

·       On Tuesday, trade data (export and import prices) is released together with the Services sector PMI and the Job Openings and Labour Turnover survey (JOLTS). The trade deficit is likely to hold around $46 billion while the services sector will continue to expand.

·       On Wednesday, usual weekly data on home purchase and refinancing is issued alongside minutes of the March Federal Reserve meeting. The minutes should provide investors with a little more information on the ‘hot button’ issues for Federal Reserve members.

·       On Thursday, the usual weekly data on claims for unemployment insurance is released together with data on new lending – consumer credit. Economists tip a lift in new credit from US$10.5 billion to $12 billion – a sign of improving confidence.

·       On Friday, data on wholesale sales and inventories is released.

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