Craig James – Chief Economist – CommSec
Reserve Bank back in focus
· As regularly seems to happen, the past week was packed with economic data and events and the coming week is far more pedestrian – from feat to famine. The highlight is the Reserve Bank Board meeting on Tuesday.
· But the week kicks off on Monday with the release of the monthly inflation gauge and the job advertisement series.
· The inflation gauge is produced by the Melbourne Institute and is the best monthly estimate of inflation in Australia.
· The job ads data is produced by ANZ. Five years ago it was a key forward-looking gauge on the job market but job openings are now advertised on a range of corporate and social media sites.
· On Tuesday the Reserve Bank Board meets to decide interest rates. Will the Reserve Bank cut rates again? Simply, there is no rush. The economy is doing well; it is just that inflation is too low. The Reserve Bank Board can afford to wait until it sees the June quarter inflation data in late July before deciding the next rate move.
· Also on Tuesday the weekly consumer confidence data from ANZ and Roy Morgan is released. Confidence is holding up remarkably well despite the fact that we are in an election period.
· On Wednesday, the April housing finance data is released – the data on new home loans. Based on figures from the Bankers Association we expect that the number of loans for owner-occupiers (people who are buying homes to live in them) rose by 3.5 per cent. In March the number of new owner-occupier housing loans (commitments) fell by 0.9 per cent after rising by 0.9 per cent in February.
· There will be plenty of interest in refinancing statistics data though after the 8 per cent lift in March to record highs.
· And on Friday the broader lending finance data is released. This includes not just home loans but also business, personal and lease loans. Total new loans (personal, business, housing & lease) rose by 0.7 per cent in March after a 3 per cent rise in February.
Chinese data dominates in lacklustre week
· Similar to the situation in Australia, the economic calendar is more sparsely populated in the US in the coming week. Still, there are some ‘top shelf’ indicators to watch in China.
· The week kicks on Monday in the US with Federal Reserve chair, Janet Yellen, to deliver a speech on the economic outlook and monetary policy. This may settle the argument on the timing of the next rate hike.
· On Tuesday in the US updated data on labour costs and productivity are released – figures derived from the latest economic growth (gross domestic product) estimates. Labour costs may have lifted at a 4.1 per cent annual rate with productivity down 0.6 per cent. This is hardly the optimal combination and one that will keep Federal Reserve policymakers poised to lift interest rates.
· Also released on Tuesday is data on consumer credit, a measure of lending in the economy. The usual weekly data on chain store sales is also released on Tuesday.
· On Wednesday the JOLTS series is released – the Job Openings and Labour Turnover Series. This series is similar to the job vacancies or job advertisement series in Australia – a forward-looking gauge for the job market. Over the 12 months ending in March, hires totalled 62.4 million and separations totalled 59.6 million, yielding a net employment gain of 2.8 million.
· Also on Wednesday, in China the May international trade data are released – exports and imports – one of the timeliest and cross-checkable economic indicators. Over the year to April, exports were down by 1.8 per cent while imports were down by 10.9 per cent. All major countries release trade figures so the Chinese data can be cross-checked for accuracy.
· On Thursday, the wholesale sales and inventories data are released in the US. Sales rose 0.7 per cent in March with inventories up 0.1 per cent – more signs of strength in the economy. The usual weekly data on new claims for unemployment insurance (jobless claims) is also released.
· Also on Thursday in China the monthly inflation figures are released for May – producer and consumer prices. Producer prices are down 3.4 per cent over the year while consumer prices are up 2.3 per cent, although boosted by higher food prices.
· And on Friday in the US, the preliminary June consumer sentiment survey results are released together with the May estimates of the Federal Budget. Consumer sentiment is at the highest levels in 11 months.
Sharemarket, interest rates, currencies & commodities
· Do you think the Aussie dollar has been volatile over the past financial year? The Aussie hit its lows against the US dollar on January 15 at US68.24 cents and hit highs of US78.35 cents on April 21.
· While the lows and highs occurred in a relatively short time-frame, over 2015/16 as a whole the Aussie dollar moved in a US10.09 cent range. If that range still holds over the next month it will be the least volatile year for the currency in a decade. Good news for importers and exporters; bad news for traders.
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