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Craig James – Chief Economist – CommSec

 Reserve Bank hogs the limelight
•      Another big week of economic events is in prospect in Australia over the coming week including data on retail spending and housing finance. In addition, after essentially two months on the sidelines, the Reserve Bank steps back into the limelight with an interest rate decision and also the release of the Statement of Monetary Policy. In China, the trade data will take precedence. And in the US, trade and consumer sentiment data are also due.
•       In Australia, the week kicks off on Monday when investors will finally get a look at how retailers performed over December. In addition the December quarter inflation-adjusted data will be released. Retail sales lifted by 0.2 per cent in November to be up 3.3 per cent over the year. Interestingly in the prior three months, non-food retailing rose by 2 per cent – the strongest three-month result in 2 years. The Commonwealth Bank Business Sales index indicated that sales recorded healthy growth in December. For the record, we expect retail trade rose by 0.3 per cent in December and by a sizeable 0.9 per cent in real terms over the December quarter.
•       Also on Monday, data on job advertisements is issued. In the past this was a trusted gauge of labour demand but nowadays more people are going straight to company websites and using social media to scour for available positions.
•       Job advertisements fell from 4½-year highs in December, down by 1.9 per cent in the month. Job ads are up 3.7 per cent on a year ago.
•       The Reserve Bank Board meets on Tuesday and much has changed in the past two months. Financial market volatility has eased, oil prices have steadied; and the Aussie dollar has lifted – albeit marginally. And on the global front, economic conditions are certainly healthier.
•       It is almost certain that policymakers will keep rates on hold and maintain a neutral stance – suggesting rates are likely to remain stable over coming months. Interestingly if the Reserve Bank did indeed surprise and cut rates, it would be able to flesh out its reasoning in Friday’s Statement on Monetary Policy. In the Reserve Bank’s interest rate decision, investors will be particularly interested in the policymaker’s views on the Aussie dollar and also the outlook for inflation.
•       Also on Tuesday, the Australian Industry Group will release the Performance of Construction index, alongside the ANZ/Roy Morgan weekly consumer sentiment survey results.
•       On Thursday, the Housing Industry Association will release figures on new home sales for December. New home sales rose by 6 per cent in November, but it was from a 27-month low. It is clear that activity levels have, or are in the process of, topping out. There is greater caution on the part of buyers and builders in response to record building and that suggests slower home price growth over in 2017.
•       Also on Thursday the Reserve Bank Governor is scheduled to deliver a speech at the A50 Australian Economic Forum (8.00pm AEDT). A title for the speech has not yet been released, but no doubt there are a few ‘hot button’ issues at present such as the Governor’s views on the stronger Australian dollar, growth in home prices and the outlook for the US economy under a new President.
•       On Friday home loans (housing finance) data is released. The home loan data may prove a surprise with data from the Bankers Association suggesting the number of owner-occupier home loans may have lifted by 1.2 per cent in December while investment lending is expected to lift by 2 per cent. While there may be less activity taking place over the summer holiday months, if the results prove correct, it will show that low interest rates are still enticing potential home buyers to upgrade their homes, albeit at a slower pace than witnessed last year.
•       As mentioned above, the spotlight on the Reserve Bank doesn’t stop with the Board meeting – the quarterly Statement on Monetary Policy is slated for release on Friday. Not only does this report assess economic developments over the past quarter, it includes the latest economic growth and inflation forecasts. And once again the focus will be squarely on inflation outcomes.
Overseas: US and China trade data in focus
•        Turning attention overseas, there are sparse helpings of ‘top shelf’ US economic data in the coming week with the main economic data of interest being trade and consumer credit data. China emerges from the Lunar New Year holidays with the release of key economic data.
•        The week kicks off on Tuesday with the release of the monthly trade data in the US alongside figures on consumer credit and JOLTS job openings. The trade deficit should hold around $45 billion, while consumer credit is likely to have risen by $20 billion in December. Also on Tuesday in China, the Caixin services purchasing managers index is issued.
•        On Thursday, US wholesale inventories and the usual weekly jobless claims numbers are released.
•        On Friday in the US, import prices, the monthly budget statement and the University of Michigan consumer sentiment index are released. Forecasts centre on import prices lifting by 0.2 per cent in January after a 0.4 per cent rise in December. The preliminary January reading on consumer sentiment is expected to show a modest fall from 98.5 to 97.9.
•        In China the National Bureau of Statistics may release trade data on Friday.Sharemarkets, interest rates, exchange rates and commodities
•        The Australian profit reporting season cranks up a notch in the coming week as the US earnings season starts to wind down.
•        On Tuesday earnings announcements are expected from Transurban and SCA Property. On Wednesday, Rio Tinto, carsales.com CIMIC, Genworth, Skycity Entertainment, National Storage and AV Jennings are amongst those listed to issue results.
•        On Thursday, a few more companies will report earnings including AGL, Suncorp Group, News Corp, Henderson Group and AMP.
•        On Friday, REA Group is amongst those listed to issue earnings 

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