Savanth Sebastian – Economist – CommSec
Spotlight on wages in Australia
· In Australia over the coming week wage data will be in focus. While in the US the main interest will be in the minutes of the last Federal Reserve Open Market Committee meeting.
· In Australia the week kicks off on Tuesday. Not only will the minutes of the last Reserve Bank Board meeting be released but data on car sales and consumer confidence will be issued and dissected by investors and analysts.
· The Reserve Bank has already released the reasoning for its decision to cut interest rates. And the quarterly Statement on Monetary Policy has also been issued. So the main interest in the Board minutes will be any insights from the Reserve Bank “liaison” with businesses or retailers.
· The Australian Bureau of Statistics (ABS) provides seasonally adjusted and trend estimates on auto sales on Tuesday. The industry data has already revealed that the rolling annual total of sales eased from record highs in July. But sales of sports utility vehicles remain buoyant.
· And also on Tuesday the weekly consumer confidence data is issued from Roy Morgan and ANZ. Confidence should lift now that ‘Brexit’ fears and election uncertainty have been resolved.
· On Wednesday the main measure of wages is released by the ABS – the wage price index. While many remark at the ‘extraordinary’ situation of the lowest wage growth on record, it is still the fact that wage growth outpaces the record low reading of underlying inflation. We tip wage growth of 0.5 per cent in the quarter and 2 per cent growth over the year – actually double the annual growth of “headline” inflation.
· On Thursday there are two pieces of economic data. Most focus will be on the July jobs report. But the May estimates of average weekly earnings are also issued.
· First to the jobs data. We expect that election uncertainty prevented any marked movement in the state of the job market. Jobs may have lifted by 5,000 in July but the jobless rate may have held steady near 5.8 per cent. Scope for stronger jobs growth now exists with election uncertainty out of the way.
· The average weekly earnings data is now only released every six months. However the figures are important in that they provide dollar estimates of wages in the economy across states and industries.
Federal Reserve: where to for interest rates?
· In the coming week in the US, various ‘top shelf’ indicators are expected like consumer prices. But most analysts and investors will spend time dissecting the minutes from the last Federal Reserve meeting.
· The week kicks off in the US on Monday with data on capital flows and a gauge on home builder sentiment. The June readings on bond buying and longer-term capital flows will be released. And the National Association of Home Builders releases their sentiment index for August.
· In the US on Tuesday there are three ‘top shelf’ indicators – industrial production, housing starts and consumer prices. To highlight the patchy nature of economic data, production may have lifted just 0.2 per cent in July. And housing starts may have eased just a touch to a 1.18 million annual rate in the month. Neither reading adds to the case for a rate hike in 2016.
· And the “core” reading of consumer prices (excludes food and energy) may have risen just 0.2 per cent in July to stand 2.2 per cent higher over the year. This data hardly suggests inflation is a key concern. The weekly data on chain store sales is also released on Tuesday.
· On Wednesday the minutes (details) of the July 26/27 Federal Reserve meeting are issued. It is widely expected that the Fed will leave interest rate settings unchanged until December at the earliest. This belief will be tested on Wednesday. Activity data is patchy but the job market is strong.
· Also on Wednesday the regular weekly data on US home purchase and refinancing is issued.
· And on Thursday in the US, the weekly figures on claims for unemployment insurance are released together with the Philadelphia Federal Reserve survey and the leading index. The “Philly Fed” index is tipped to lift from minus 2.9 to +1.5 in August while the leading index is expected to post another 0.3 per cent gain in July.
Sharemarket, interest rates, currencies & commodities
· The Australian profit-reporting season moves from third gear into top over the coming week.
· On Monday, earnings are expected from GPT Group, Ansell Limited, JB Hi-Fi, Aurizon Holdings, CSG Limited and Newcrest Mining.
· On Tuesday, BHP Billiton, Domino’s Pizza, Challenger Limited, Tatts Group, Invocare, SG Fleet and Mirvac are amongst those to report earnings.
· On Wednesday, amongst those scheduled to issue their profit results are Arrium Limited, Aveo Group, Dexus Property, Stockland, CSL Limited, QBE Insurance, Primary Health Care and Sonic Healthcare.
· On Thursday, earnings include those from AMP, Sydney Airport, ASX Limited and Brambles Limited.
· On Friday, Woodside Petroleum, Insurance Australia Group, Santos, Lend Lease and Medibank Private are amongst those expected to release earnings.
Savanth Sebastian – Economist – CommSec