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Savanth Sebastian – Economist – CommSec

Quiet week in Australia; Shortened-trading week in the US

·        A quiet week is in prospect in Australia. But despite Thanksgiving occurring on Thursday, there is plenty on the radar screen in the US.

·        The week kicks off in Australia on Monday when the Commonwealth Bank releases the Business Sales Index (BSI) – a measure of economy-wide sales. The index is derived by tracking credit and debit card transactions across the CommBank Group. And it is a broader measure of spending than the retail sales data from the Australian Bureau of Statistics (ABS). That is, it covers consumer, business and government spending and includes activities such as autos, hotels and personal services. In line with the retail sales data, spending has been lifting in recent months after a mid-year pause.

·        On Tuesday the weekly consumer confidence survey is issued by ANZ and Roy Morgan. Confidence levels remain healthy, with investors encouraged that the sharemarket has lifted following the recent US elections. The survey also includes a measure on inflation expectations – an indicator that the Reserve Bank is now tracking closely.

·        And the Reserve Bank also features on Tuesday with the Assistant Governor (Economic), Christopher Kent, speaking at the annual dinner of the Australian Business Economists group.

·        On Wednesday there are two indicators to watch. The first is the quarterly “Construction Work Done” release from the ABS. While the data covers both commercial and residential construction, it is the data on home building that is of most interest. The home building data serves as an input to the calculation of economic growth or annual growth of gross domestic product (GDP). The GDP data is slated for release on December 7.

·        The second indicator to watch on Wednesday is the monthly data on skilled vacancies. This data is produced by the Department of Employment and goes into some detail in highlighting the jobs that are in demand across the economy.

·        On Thursday, the ABS releases the detailed data on the job market. The “high-level” job market figures like job growth and unemployment tend to be released on the second Thursday of the month. And the more detailed regional and demographic estimates of the job market are released a week later.

Overseas: US & European “Flash” manufacturing in focus . Shortened-trading week in the US

·       In the coming week in the US, the Thanksgiving Day holiday is celebrated on Thursday. Still, there is plenty of data to watch. And the Federal Reserve releases minutes of the last policy-making meeting held November 1-2.

·       The week kicks off in the US on Monday when the National Activity index is released – a composite measure of the economy’s performance.

·       In the US on Tuesday, data on existing home sales is released together with the influential Richmond Federal Reserve survey and the usual weekly data on chain store sales. Economists expect that sales of existing homes were steady at a 5.47 million annual rate in October.

·       On Wednesday, there is a raft of data released with vendors keen to publish before Thursday’s Thanksgiving Day holiday. The Federal Reserve will release the minutes of the last policymaking meeting held on November 1-2. In terms of economic data, estimates of durable goods orders are released (measure of business investment) together with new home sales, the Federal Housing Finance Agency home price series and consumer sentiment. The usual weekly data on claims for unemployment insurance may also be released on Wednesday.

·       Economists expect that new home sales were little-changed at an annual rate of 593,000 in October. Durable goods orders are tipped to have lifted by 1.1 per cent in October after a 0.3 per cent decline in September. And home prices may have continued growing at a 6.4 per cent annual pace in September.

·       Globally, the Markit surveys of manufacturing and services sectors are due on Wednesday and Friday respectively. These surveys are released in the US, Japan and Europe and are “flash” readings or early estimates.

·       On Friday in the US, “advance” data on international trade is released with similar “advance” estimates on retail and wholesale inventories.

Financial markets

·       The US elections have come and gone. That is positive in its own right, especially the fact that a clear result was achieved – contrary to earlier fears of disputed results.

·       Encouragingly investors haven’t wasted any time in focussing on the likely winners to come out of the election victory by Donald Trump. The expectation is that Trump will carry out his promise of cutting taxes and increasing infrastructure spending. Growth-focussed stocks in Materials and Industrials sectors have done well in the election aftermath. Metals and mining prices have also soared.

·       The other key development is the lift in bond yields. The perception is that stronger economic growth could prove inflationary – a factor that could reduce the purchasing power of bonds over the medium-term. 

·       And the lift in bond yields has proven a global, rather than local trend, serving to boost Australian bond yields to 7-month highs.

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