Craig James – Chief Economist – CommSec
Employment data in focus
· In Australia there is a healthy offering of new economic data in the coming week. Overseas the highlight is Chinese economic growth figures on Friday.
· In Australia, the week kicks off on Monday with data on housing finance (new home loans). Supported by low interest rates and improved affordability, loans for owner-occupiers (those who want to live in the homes) may have lifted by 2.5 per cent in February. And the total value of all new loans may have lifted by 2.0 per cent in the month.
· On Tuesday, Roy Morgan and ANZ release the results of the weekly consumer confidence survey. The Budget and upcoming election are hogging the radar screen at present.
· National Australia Bank also releases the March business survey results on Tuesday. The NAB business conditions index rose from +5.4 to +8.3 points in February. And the rolling annual average rose from +7.8 points to a 7-year high of +8.3 points. And the business confidence index rose from +2.7 points to +3.4 points.
· And also on Tuesday, the Reserve Bank releases February data on credit card and debit card transactions. Plastic cards are being used more often, especially for smaller transactions.
· On Wednesday, the Westpac/Melbourne monthly survey of consumer confidence is issued together with data on dwelling starts from the Bureau of Statistics (ABS).
· Also on Wednesday, the ABS releases data on lending finance – broader data on new lending across the economy – including business, personal, lending and lease loans. The business and owner-occupier housing sectors are the key drivers at present.
· On Thursday, the monthly employment report is released. In mid-to-late 2015 employment was going gangbusters. A period of consolidation was necessary and this appears to have been what we’ve seen in the past three months. But we expect that the below-average growth will give way to above-average growth in March and we are tipping job growth of around 30,000 in the month. The jobless rate should remain near 5.8-5.9 per cent.
· And on Friday the Reserve Bank releases its bi-annual Financial Stability Review. While primarily designed to check the health of the financial system, a big focus in Friday’s report will be comments on the home building markets in various capital cities, notably Brisbane and Melbourne.
China economic growth data; US retail sales; IMF forecasts
· Chinese and US economic data compete for top billing in the coming week. The highlight is probably Chinese economic growth data on Friday. The International Monetary Fund will also update its economic forecasts.
· On Monday the week kicks off with Chinese data on consumer and producer prices. Producer prices are down 4.9 per cent over the year while consumer prices are up by 2.3 per cent.
· On Tuesday, US data takes centre-stage with data on export and import prices to be released together with the NFIB Business Optimism index – a gauge of small business sentiment. The usual weekly data on chain store sales is also issued.
· On Wednesday in the US the usual weekly data on home purchase and refinancing is issued alongside data on retail sales and producer prices. Excluding cars, retail sales may have lifted by 0.5 per cent.
· Also on Wednesday, March trade data is issued in China. Data from previous months has been complicated by the timing of holidays.
· On Thursday in the US the usual weekly data on claims for unemployment insurance is released together with data on consumer prices. Inflation must show signs of perking up for the Federal Reserve to become more gung ho about lifting interest rates.
· On Friday, production figures are released in the US. And in China, economic growth data is issued with the usual monthly readings on retail sales, production and investment. The Chinese economy expanded at a 6.8 per cent annual pace in the December quarter. Predictably growth will ease further in coming years to reflect maturation of the economy’s development.
Sharemarket, interest rates, currencies & commodities
· US earnings season gets underway in the coming week. That is, the time when quarterly profit reports are released. Overall, the US economy has been performing well with the first rate hike in nearly a decade delivered in the December quarter. But that is unlikely to have helped corporate earnings.
· According to Thomson Reuters I/B/E/S, earnings from S&P 500 companies are expected to have fallen by 6.9 per cent over the year to the December quarter (or a decline of 1.8 per cent if the energy sector was excluded).
· Alcoa kicks off the earnings season on Monday with earnings per share expected to be down from 28c to 3c.