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Craig James – Chief Economist – CommSec
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Reserve Bank, population and jobs data
·       There are no ‘top shelf’ indicators in Australia in the coming week.
·        The week kicks off on Monday with the Business Sales Index from Commonwealth Bank – a measure of economy-wide spending.
·        On Tuesday minutes of the last Reserve Bank Board meeting are released. While the Reserve Bank seems happy with the current state of the economy and interest rate settings, investors are looking for further insights.
·        Also on Tuesday the House Price Index is released by the Bureau of Statistics (ABS) while Reserve Bank Assistant Governor Guy Debelle delivers a speech together with Alex Heath, Head of the Economic Analysis Department.
·        On Wednesday, the Department of Employment releases the Vacancy Report. Just like job advertisements and broader job vacancies, the data acts as a leading indicator of the job market. In April the internet vacancy index rose by 2.8 per cent to be up 6 per cent on a year ago.
·        On Thursday, the December quarter population data is released by the ABS together with the detailed job market data for May.
·        In the September quarter Australia’s population expanded by 313,200 people to 23,860,100 people. Overall, Australia’s population growth rate fell from 1.35 per cent to 1.33 per cent – a 10-year low.
·        In terms of the industry jobs data, employment fell by 3,200 over the three months to February after a gain of 71,900 in the previous three months.
·        Also on Thursday, Reserve Bank Assistant Governor Guy Debelle delivers a speech as does Luci Ellis, Head of the Financial Stability Department.
US Fed chair takes the stand
·       In the coming week, Federal Reserve chair, Janet Yellen, testifies on the economy. And all eyes will be focussed on Thursday’s “Brexit” vote in the UK.
·       The week kicks off on Tuesday in the US with the Federal Reserve chair, Janet Yellen, delivering the ‘Semi-annual Monetary Policy Report’ to the Senate Banking Committee. The hope is that the report and testimony from the Federal Reserve chair will clear up a lot of issues related to how the Fed believes the economy is faring, where rates are headed and even on issues like the “Brexit” vote.
·       On Wednesday, two of the week’s housing market indicators are released in the US – data on existing home sales and a measure of home prices by the Federal Housing Finance Agency (FHFA).
·       Economists tip a near 1 per cent lift in existing home sales to a 5.5 million annual rate in May after a 1.7 per cent gain in April. Some believe a housing shortage exists with only 4.7 months of stock on hand, below the 6-month figure regarded as balanced between demand and supply.
·       The FHFA data will provide further insights on the state of the housing market. In March, home prices were up 6.1 per cent on a year ago, led by California.
·       On Thursday, the spotlight is shone on the UK. After months of speculation on the outcome, UK voters will finally get their chance to decide whether the country should stay in the European Union. The referendum could go either way. And no one knows what the broader implications will be. So investors will walk of eggshells awaiting the verdict.
·       In the US on Thursday data on new home sales is released together with the leading index. New home sales soared by over 16 per cent in April but the outsized increase is expected to be followed by an outsized fall of around 11 per cent in May.
·       Also on Thursday, “flash” readings on manufacturing activity are released is the US, Europe and Japan.
·       And on Friday US data on durable goods orders (a key gauge of business investment) is released with consumer confidence. Durable goods orders are tipped to have eased by 0.8 per cent in May after a healthy 3.4 per cent gain in April.
Sharemarket, interest rates, currencies & commodities
·       Last week we looked at how global sharemarkets and currencies have performed so far in 2015/16. This week it is the turn of commodity or raw material prices.
·       One closely-watched commodity price index is the Thomson Reuters CRB futures index. So far in 2015/16 the CRB futures index is down by just over 15 per cent after being down almost 32 per cent in mid-February.
·       At face value, the decline in the CRB futures index suggests general weakness in commodity prices. But that actually hasn’t been the case. In fact the sugar price has soared by 55 per cent with rice up 16 per cent and gold up around 10 per cent. Zinc, cotton and wool prices have been largely unchanged since June 30 last year.
·       On the downside, nickel has recorded one of the biggest declines, down around 26 per cent, with copper down 22 per cent, wheat down 21 per cent and beef down around 11 per cent. Other base metals have been better-behaved with aluminium and lead down 3-4 per cent.
·       The high profile commodities – oil and iron ore – have had a volatile twelve months. Oil fell from US$57 a barrel to US$26 before recovering to around $48. Iron ore fell from near US$59 a tonne to US$37, before also recovering to around $50. But overall oil is still down around 18 per cent over the year with iron ore down around 14 per cent.

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