Reserve Bank and retail spending to draw the most focus
· The ‘Autumn Avalanche’ continues into its second week. Domestically a number of key economic data pieces will be released including retail trade (sales). Also the Reserve Bank Board meeting takes place. There is plenty to watch overseas including Chinese inflation (Thursday) and the key US employment report (Friday).
· In Australia, the week kicks off on Monday with the release of the retail spending data for January. No doubt the latest figures will garner plenty of interest given the slowdown in retail activity in December. The Commonwealth Bank Business Sales index indicated that sales recorded modest growth in January. For the record we expect that retail sales rose by 0.3 per cent in January.
· 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 rose by 4 per cent in January to a five-year high. It was the strongest monthly rise in ads in 2½ years. Job ads are up 7.1 per cent on a year ago.
· The Reserve Bank Board meets on Tuesday and it is a pretty safe bet that interest rates will be left unchanged. Financial market volatility remains subdued, oil prices are steady; and the Aussie dollar has lifted – albeit marginally. And on the global front, economic conditions are certainly healthier. Importantly investors will continue to focus on the statement accompanying the interest rate decision. Once again housing and the currency will draw the most interest.
· Also on Tuesday, the Australian Industry Group releases the Performance of Construction index while Roy Morgan and ANZ release the weekly consumer confidence reading. Confidence levels remain healthy, up 7 per cent over the year. Notably, consumers believe their finances are in good shape and are expected to stay in good shape.
· On Friday home loans (housing finance) data is released. The home loan data may prove a surprise with data from the Bankers Association indicating that the number of owner-occupier home loans may have fallen by 2.5 per cent in January while investment lending may have fallen by 2 per cent. It is clear that potential home buyers continue to upgrade their homes, albeit at a slower pace than witnessed last year. Interestingly home prices are lifting at a rapid pace particularly across in Sydney and Melbourne.
US and Chinese data: Spotlight on US employment and China trade
· There is plenty of data to watch in the US; however the “star” of the US monthly economic data calendar is the non-farm payrolls (employment) figures. And those job figures are released in the coming week on Friday.
· Economists expect that the good run of results continued in February with 175,000 jobs created. Apart from the jobless rate, the other indicator in the report that will be scrutinised will be the measure of wages. If wages are starting to lift, the Federal Reserve will feel more comfortable continuing the process of “normalising” interest rates.
· In terms of the other indicators, the procession starts on Monday with data on factory orders and the final reading on durable goods orders – a proxy for business investment. Factory orders are expected to have risen by 1 per cent in January.
· On Tuesday, the trade balance and consumer credit data are released. A trade deficit of around $46 billion is expected while consumer credit should have risen by $20 billion in January.
· On Wednesday, the February figures on private sector employment from ADP are due. Economists tip an 180,000 rise in private sector jobs.
· Also on Wednesday the second reading on December quarter non-farm productivity and wholesale inventories are released. Productivity should have lifted at a 1.5 per cent annual rate.
· On Thursday the usual weekly data on jobless claims is released alongside household wealth data for the December quarter. In the September quarter household wealth rose by $1593 billion. The lift in house prices and rising sharemarkets should continue to lift wealth levels in the December quarter.
· And on Friday, the February data on employment is released – the non-farm payrolls data. As stated earlier, economists expect that 175,000 new jobs were created in February. Also, the unemployment rate may have eased from 4.8 per cent to 4.7 per cent. In addition, on Friday the monthly budget statement is released.
· In China the National Bureau of Statistics releases trade data on Wednesday and inflation data on Friday. While both exports and imports are down on a year ago, most focus is on imports as a measure of domestic spending. The trade surplus should hold near $51 billion for February although the timing of Chinese New Year could add a degree of uncertainty to the outcome.
· In terms of inflation, it is notable that business inflation – producer prices – is now lifting. In fact, annual growth of producer prices rose to a 5½-year high of 6.9 per cent in January. And consumer prices rose to a 2½-year high of 2.5 per cent in the year to January.
Sharemarkets, interest rates, exchange rates and commodities
· The Australian profit reporting season has come to a close. CommSec has analysed all results from ASX 200 companies. In short, the earnings season has been good. Very good. Only eight companies from the ASX 200 have produced a statutory loss for the six months to December.
· Excluding BHP Billiton, aggregate profits rose by 36 per cent to $25.3 billion while aggregate cash holdings of all ASX 200 reporting companies rose by 11 per cent on June levels to $110 billion. Of companies paying a dividend, 68 per cent lifted dividends; 14 per cent maintained dividends; and almost 19 per cent of companies cut dividends. Recently many were surprised by survey results that showed that business conditions are the best in nine years. The earnings results confirm that Corporate Australia is in good shape.