Savanth Sebastian – Economist – CommSec

Consumer confidence and housing data in focus

·       After the data deluge over the past week including a Reserve Bank Board meeting and Federal Budget, the coming week is somewhat more sedate in terms of economic data releases in Australia. Across the globe investors will focus on the Chinese economic data released over the week. While in the US, retail sales data will garner interest in the latter part of the week. Also a Bank of England interest rate decision and Eurozone economic growth will dominate discussion on Thursday and Friday.

·       In Australia the week kicks off on Monday with ANZ jobs ads. In the past, budding employers would advertise positions in newspapers or on job websites. Now positions are more likely to be found on individual company websites or through social media. So while the data on job ads is less instructive, figures show that they are still up a sizeable 10.7 per cent on a year ago.

·       On Tuesday, the weekly consumer sentiment reading is released. It will be first opportunity to gauge consumer reactions to not only the Reserve Bank interest rate cut but also the Federal Budget. It is likely that confidence levels lifted, given the rate cut was passed on in full by most banks. In addition the tax cuts for middle income earners discussed in the budget would be mildly stimulatory.

·       On Wednesday, the Westpac/Melbourne Institute monthly measure of consumer sentiment is released – a survey that provides a useful check on the similar and timelier Roy Morgan weekly survey.

·       Also on Wednesday, data on housing finance is issued. The data is somewhat old news given that it precedes the latest interest rate cut. No doubt housing activity will receive a further boost in coming months. For the record, based on data from the Bankers Association, we expect that loans for owner occupation (loans for people wanting to live in homes) fell by 2.2 per cent in March. And the total value of loans (owner-occupier and investment) probably fell by 1.5 per cent.

·       On Thursday, the Reserve Bank will release figures on credit and debit card lending. Also the Reserve Bank Assistant Governor Malcolm Edey delivers a speech at the Cards & Payments Australia conference, in Melbourne. No title for the speech has been released as of yet, however the subsequent Q&A session is open to the media and may generate some discussion on the Reserve Bank’s updated inflation and growth forecasts.

·       Also on Thursday the Western Australian State Budget for 2016-17 is released.

·       And on Friday, the lending finance data for March is released by the ABS – the broadest measure of new loans being taken up by consumers and businesses. The latest data shows lending commitments are just shy of the 7½ year highs record in September 2015, primarily underpinned by business and housing loans.

Spotlight on US and Chinese data

·       So-called ‘top shelf’ economic indicators are released in China in the coming week. And in the US the focus will be on the retail sales data released on Friday. Also over the week a number of Federal Reserve speakers are scheduled, including Evans, Kashkari and Williams.

·       China will actually kick off proceedings over the week – with the release of trade data on Sunday. A trade surplus of around $40 billion is expected for April, with a modest lift in exports offsetting an anticipated slide in imports.

·       In the US the National Federation of Independent Business releases its Business Optimism index alongside the JOLTS survey of job openings. Data on wholesale inventories and sales are also slated for release on Tuesday.

·       In China inflation data is released on Tuesday. Similar to Australia and most parts of the globe, inflation remains well contained. The headline consumer price index is running at around a 2.3 per cent annual rate, (boosted by food prices) while producer prices continue to suggest a modest deflationary environment.

·       On Wednesday the usual weekly data on home purchase and refinancing is issued alongside the monthly budget data.

·       On Thursday, the weekly figures on claims for unemployment insurance are released together with the import price index.

·       And we have to wait till Friday for the ‘top shelf’ indicators – namely retail sales and producer prices. Economists tip a solid 0.7 per cent increase in April retail sales after the 0.3 per cent slide in March. No doubt fluctuating petrol prices are having a significant influence on the results. Encouragingly core sales (sales less autos and gasoline) are expected to have lifted by 0.4 per cent in April.

·       In terms of the producer price index (business inflation), there are no signs of inflationary pressure and thus no rush to lift rates. A 0.1 per cent rise in the “core” rate (excludes food and energy) is expected. Data on business inventories is also issued with the University of Michigan confidence reading.

·       In China on Saturday, key ‘top shelf’ indicators are also issued, namely retail sales, production and investment. Annual growth rates are slowing, but that is ‘normal’ for a maturing economy. Also lending and money supply data is between Tuesday and Sunday.

Sharemarket, interest rates, currencies & commodities

·       The Reserve Bank cut the cash rate to a historic low of 1.75 per cent on Tuesday. Essentially the low inflation result provided policymakers with an opportunity to provide an additional degree of stimulus without having to worry about inflation. The statement following the decision suggested a more cautious tone when it came to economic activity in the early part of 2016.

·       The next trigger point for monetary policy will be the inflation data released on 27 July. According to current pricing in financial markets, there is now a 52 per cent chance of a rate cut in August. Looking further out, another rate cut is fully factored by December. 

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