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Savanth Sebastian – Economist – CommSec

Spotlight on inputs into GDP figures
·       Domestic economic data remains in short supply. The highlight in the coming week is construction work data on Wednesday. But it is another big week for corporate earnings with commentaries on profit results and the outlook statements from major companies of interest to get a better handle on the economy.
·       The week kicks off on Monday with the release of the Commonwealth Bank Business Sales index – a timely measure of economy-wide spending.
·       On Tuesday there is an eclectic spattering of statistics. The Bureau of Statistics (ABS) issues additional data on producer prices while ANZ and Roy Morgan issue the usual weekly consumer confidence survey.
·       Consumer confidence rose by 2.5 per cent last week and now stands almost 4 per cent higher than a year ago. Lower interest rates, cheaper petrol prices and lack of inflation across the economy are all helping to ensure added savings for households. Confidence levels may also be buoyed by the fact that wages are outpacing prices by the biggest margin in 3½ years.
·       It is important to realise the decision to lower interest rates was driven by the low inflation outcomes and to some degree the Reserve Bank was cutting rates from a position of strength – with the Australian economy still recoding healthy growth. No doubt cutting rates from already record low levels is having its limitations but policymakers would be hoping that the lift in confidence last week continues over the next couple of months.
·       On Wednesday, the ABS issues preliminary Construction Work Done figures for the June quarter. The data covers residential, commercial and engineering construction, but it is the residential building figures which act as an input to the national accounts – that is, it assists in the calculation of economic growth figures.
·       In the March quarter construction work fell by 2.6 per cent, driven by a 4.2 per cent slump in engineering work and a 5.5 per cent slide in commercial building. However residential work lifted by 1.5 per cent to record highs, and that is where the focus will be. Inflation in the building sector is another aspect that comes to the fore in the data release. At present building sector inflation is growing at the fastest pace in five years, but that is being driven by outsized gains in activity last year and it is likely that inflation will moderate in line with price growth across the rest of the economy.

·       On Thursday, the ABS releases detailed job market data such as employment across demographic groups and unemployment rates for regions.
Bevy of housing data in the US
·       There is plenty to watch in the United States over the coming week with a particular focus on the housing sector. Also investor focus will be centred on the “flash” August readings on manufacturing activity in the US, Europe and China.
·       In the US, the week kicks off on Monday with the Chicago Fed National Activity Index. Economists expect the gauge to remain steady at 0.2 in July.
·       On Tuesday, new home sales and the influential regional survey – the Richmond Fed manufacturing index – are released. New home sales may have eased by around 2.5 per cent in July after lifting by 3.5 per cent in June. 
·       Also on Tuesday the “flash” August readings on manufacturing activity in the US, Europe and China are slated for release.
·       While on Wednesday the focus is squarely on the housing sector. The monthly home price index is issued together with existing home sales and the weekly report on mortgage transactions – purchases and refinancing. In May home prices lifted 0.2 per cent to stand 5.6 per cent on a year ago. At present the pace of growth is healthy without being excessive.
·       The strength of the housing market is highlighted with existing home sales, and economists expect a 0.1 per cent rise in existing home sales to a 5.58 million annual rate in July after a 1.1 per cent gain in June. Some believe a housing shortage exists with only 4.6 months of stock on hand, below the 6-month figure regarded as balanced between demand and supply.
·       On Thursday, US data on durable goods orders (a key gauge of business investment) is released alongside the “flash” Markit services gauge, weekly jobless claims and the Kansas City Federal Reserve survey of business activity. Durable goods orders are tipped to have eased by 0.4 per cent in July, essentially reversing the 0.4 per cent fall in June.
·       And on Friday there are three indicators of note -the second reading on US economic growth for the June quarter, the advanced goods trade balance and the University of Michigan consumer sentiment index. Economists tip a modest revision with annualised economic growth of 1.1 per cent, while the final reading of consumer sentiment should lift from 90.4 to 90.8.
Sharemarket, interest rates, currencies & commodities
·       The Australian profit-reporting season moves into its final week with the majority of companies issuing results.
·       On Monday, earnings are expected from Fortescue Metals, Spark infrastructure, UGL, GWA and Bluescope Steel.
·       On Tuesday, Oil Search, Caltex Australia, Bradken, Virtus Health, Healthscope, SMS Management, Hills limited, Monadelphous Group and Boart Longyear are amongst those to report earnings.
·       On Wednesday, amongst those scheduled to issue their profit results are McMillan Shakespeare, Blackmores, APA, Qube holdings, Wesfarmers, Worley Parsons, St Barbara Mining, Codan, Shine Corporate, Qantas Airways A2 Milk, Boral and Ardent Leisure.
·       On Thursday, earnings include those from Iluka, AWE, Southern Cross Media, Charter Hall, Perpetual, Platinum Asset Management, Woolworths, Billabong, Nine Entertainment, South32, Flight Centre Travel, MYOB, Fantastic Holdings and Amcor Limited.
·       On Friday, Coca-Cola Amatil, Super Retail Group, Mayne Pharma Group and The Star Entertainment Group are amongst those expected to release earnings.

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