Craig James – Chief Economist – CommSec
Household wealth, job vacancies
· The “top shelf” indicators are still off the agenda in Australia in the coming week. In China the purchasing managers’ indexes are released on Saturday. And in the US, a number of key indicators will be released with home prices and economic growth in particular focus.
· The week kicks off in Australia on Tuesday, when the ANZ/Roy Morgan weekly consumer sentiment survey is released. Sentiment levels softened in the past week although the four-week average index was down from 3-year highs. Overall confidence levels are healthy and no doubt being supported by the improvements in household budgets – all supportive of an improvement in retail activity in coming months.
· On Wednesday, the Australian Bureau of Statistics will release figures on engineering construction for the June quarter. Reserve Bank Assistant Governor Malcolm Edey also delivers a speech.
· On Thursday the Bureau of Statistics releases the quarterly Financial Accounts. The accounts detail findings such as the cash positions of groups like super funds and families, household wealth levels, foreign holdings of shares and bonds and the value of housing assets (land and dwellings).
· In the March quarter total household wealth (net worth) fell by $44.1 billion to $8,640.6 billion, easing from the record high $8,653.8 billion in the December quarter.
· Also on Thursday, one of the forward-looking indicators of the job market – job vacancies – is also released.
· And on Friday, the Reserve Bank releases the financial aggregates publication, a report that includes data on lending (private sector credit) and the money supply. In July private sector credit (lending) rose by 0.4 per cent to stand 6.0 per cent higher than a year ago. And it is likely that credit rose by a further 0.4 per cent in August, once again driven by owner-occupied housing and business lending.
Overseas: US interest rates hog the spotlight
· There is plenty to watch in the US over the coming week. And while there are also key readings on the Chinese manufacturing and services sectors, they aren’t released in China until Saturday.
· In the US, the week kicks off on Monday, with the release of new home sales data. After the outsized 12.4 per cent lift in new home sales in July, economists expect a 9.1 per cent retracement in August.
· On Tuesday the Case Shiller home price index is released in the US together with consumer confidence, and the Richmond Federal Reserve Manufacturing index. Home prices were likely flat in July but should still be up around 5.1 per cent on a year ago. Consumer confidence may have dipped from 101.1 to 99.8 in September.
· On Wednesday in the US durable goods orders – a key measure of business spending – is released alongside the regular weekly mortgage finance data. Orders for durable, or long-lasting, goods may have fallen by 1.5 per cent in August.
· On Thursday, Federal Reserve chair Janet Yellen participates in a panel discussion. Also, revised US economic growth figures for the June quarter are released. There are three iterations of the economic growth figures each quarter – the advance, preliminary and final estimates. The final estimates for the June quarter are expected to confirm that the US economy grew at a 1.2 per cent annualised pace. The early estimates for the September quarter suggest that the economy picked up to a 2.9 per cent annualised pace.
· Also on Thursday, advance readings for US wholesale inventories and trade are released as well as pending home sales. The latter is expected to have eased by 0.3 per cent in August.
· On Friday, the University of Michigan’s final estimate of consumer sentiment for September is issued, while personal income and spending figures are also released. The final reading on confidence may have lifted from 89.8 to 90.0. And both personal incomes and spending may have lifted by 0.2 per cent in August.
· In China, the official purchasing managers’ indexes for both the manufacturing and services sectors are released on Saturday.
Sharemarket, interest rates, currencies & commodities
· Over the past two months, oil prices have proved volatile, swinging through a 20 per cent range. In early August the Nymex price dipped below US$40 a barrel to US$39.51. But in mid-August, Nymex crude was pushing up to near US$50 a barrel, settling at US$48.52. Similar – albeit, less extreme – moves have also occurred over September.
· In simple terms the world is well supplied with oil. Technological advances have led to a fall in the production costs of what are generally considered higher-cost sources of oil such as shale oil and oil sands. Estimates suggest that operating costs for Canadian producers have fallen by 17 per cent in recent years with costs for some oil sands producers down by 30 per cent.
· Based on estimates from the International Energy Agency and oil analysts, it is estimated that non-OPEC supply will lift by 2.2 million barrels per day in 2016 and a further 1.2mbd in 2017.
· In response OPEC producers and notable non-OPEC producers such as Russia are hoping to discuss measures to limit production on the sidelines of an industry conference in Algeria from September 26-28. OPEC Secretary General Mohammed Barkindo has reportedly been quoted as saying there was potential for an oil freeze deal to last at least one-year.
Craig James – Chief Economist – CommSec