Savanth Sebastian – Economist – CommSec
Confidence & lending data in focus in Australia
· In Australia over the coming week readings on business and consumer confidence are released with various lending indicators. Overseas, the usual monthly download of Chinese economic data occurs over the week. In the US, the key data is late in the week.
· In Australia the week kicks off on Monday with ANZ publishing its series on job advertisements.
· On Tuesday, ANZ and Roy Morgan release the weekly consumer confidence survey while Westpac and the Melbourne Institute release their monthly consumer confidence survey on Wednesday. The questions are effectively the same and the surveys cover the same time period. Confidence levels have improved over the past couple of weeks.
· Also on Wednesday, the Australian Bureau of Statistics (ABS) releases figures on housing finance. The home loan market has been softer in recent months despite super-low interest rates. In trend terms most lending categories have been going backwards, especially loans being taken out for those buying newly-erected dwellings or loans taken out for those building new homes. The cooling in the property market is a welcome sign given the ramp up in property over the last couple of years.
· Overall, we expect that home loans rose 4 per cent in June after falling by 1 per cent in May. But we will be keeping a close eye on the number of construction loans – a precursor to further housing supply – and the demand for investment loans – which rose by almost 4 per cent in May.
· Once the data is out of the way, the focus for investors on Wednesday is likely to be a speech by the Reserve Bank Governor Glenn Stevens. The Governor will be speaking in Sydney at the Anika Foundation (1:05pm AEST). No doubt investors will be hoping to get not only more detail on the latest inflation and growth forecasts but also the likelihood of further rate cuts. However given it is the Governor’s last official speech as the head of the Reserve Bank, he may be more reflective on his tenure over the past 10 years.
· On Friday, the ABS releases broad data on lending – data on new finance commitments for housing, business personal and lease loans. In May, new loans fell by 3.2 per cent to $67.5 billion – a 17-month low. The Reserve Bank would be hoping that the May and August rate cuts start to spur borrowing and investment.
· Also on Friday, the Reserve Bank releases the latest data on credit and debit card lending. In May the average credit card balance was down 1.8 per cent over the year – marking the biggest fall in two-years. Consumers are still winding back credit and are reluctant to take on additional debt.
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.
· China will actually kick off proceedings over the week with the release of trade data on Monday. A trade surplus of around $48 billion is expected for July, with the weakness in exports offset by a larger slide in imports.
· In the US on Tuesday the National Federation of Independent Business releases its Business Optimism index, alongside June quarter non-farm productivity and unit labour cost data. Data on wholesale inventories and sales are also slated for release.
· 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 1.8 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 US home purchase and refinancing is issued alongside the JOLTS survey of job openings and the monthly budget data.
· On Thursday in the US, 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’ US indicators – namely retail sales and producer prices. Economists tip a modest 0.2 per cent increase in July retail sales after the 0.6 per cent rise in June. 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 May.
· In terms of the producer price index (business inflation), there are no signs of inflationary pressure and thus no rush to lift rates. A 0.2 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 Friday, 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 Wednesday and Friday.
Sharemarket, interest rates, currencies & commodities
· The Australian profit-reporting season moves from second gear into third gear over the coming week.
· On Monday, earnings are expected from Argo Investments, JB Hi-Fi and Bendigo & Adelaide Bank.
· On Tuesday, Cochlear, REA Group, IOOF and Transurban are expected to report earnings.
· On Wednesday, amongst those scheduled to issue their profit results are Commonwealth Bank, Fairfax Media, Carsales.com, AGL Energy, Sky City Entertainment, Bell Financial Group, and OZ Minerals.
· On Thursday, earnings are expected from Telstra, Magellan, Atlas Iron, James Hardie and Goodman Group.
· On Friday, News Corp is expected to release earnings.
Savanth Sebastian – Economist – CommSec