Savanth Sebastian – Economist – CommSec

Inflation week

• Inflation dominates the coming week’s schedule of economic statistics. Meanwhile in the US, there is a raft of data releases including home prices and economic growth.

• The week begins in Australia on Monday with the release of the quarterly State of the States report from CommSec. The report analyses the relative economic performance of state and territory economies.

• On Wednesday in Australia, the Australian Bureau of Statistics releases the quarterly Consumer Price Index – the main measure of inflation used in Australia. In fact the CPI is regarded globally as one of the best measures of price movements or inflation.

• And for the first time in 2½ years the annual headline rate of inflation is expected to be back in the Reserve Bank’s 2-3 per cent target zone. We expect that prices rose by around 0.6 per cent in the March quarter, lifting the annual rate of inflation from 1.5 per cent to 2.3 per cent.

• One of the biggest drivers of the result is likely to be petrol, up around 6 per cent and adding almost 0.2 percentage points to the quarterly lift in the CPI. Seasonal increases in education fees and pharmaceuticals are offset by seasonal declines in holiday travel & accommodation, alcohol & tobacco and clothing.

• Stripping out the volatile elements, the “underlying” CPI is expected to lift by around 0.5 per cent in the quarter and 1.8 per cent over the year – getting closer to the 2-3 per cent band. The results for the CPI probably won’t have any direct impact on interest rates. But higher-than-expected readings could cause some analysts to bring forward expectations of rate hikes from 2018.

• The weekly consumer sentiment reading is expected to be released on the same day (on Tuesday).  Confidence at the moment is merely OK.

• On Thursday, the ABS will release the international trade price data (data on export and import prices). Export prices are tipped to have lifted 3 per cent in the quarter and import prices may have lifted 0.5 per cent. Gold, base metals, wool and wheat prices rose in the quarter while the Aussie dollar rose by 5.6 per cent.

• Also on Thursday the Reserve Bank Governor delivers a speech at the Renminbi Global Cities Dialogue Dinner. Governor Lowe will have the first chance to comment on the inflation data.

• On Friday the ABS releases the Producer Price Indexes for the March quarter while the Reserve Bank releases data on private sector credit or loans outstanding. Credit may have lifted 0.4 per cent in March.

Overseas: US economic growth and housing data

•  US economic data dominates in the week ahead. The next Chinese data is released on April 30 (Sunday). The first round of the French Presidential elections is held on Sunday (April 23).

•  On Monday the week kicks off in the US, with the national activity index and Dallas Federal Reserve manufacturing index.

•  On Tuesday, both the FHFA and Case Shiller measures of home prices are issued in the US. Annual growth of home prices stands at 5.7 per cent. The April consumer confidence data is also released with new home sales, the Richmond, Texas and Dallas Federal Reserve survey indicators and weekly data on chain store sales.

•  On Wednesday, the usual US weekly data on home purchase and refinancing is issued with revised figures on building permits.

•  On Thursday in the US the usual weekly data on claims for unemployment insurance is released together with durable goods orders (measure of business investment), pending home sales, advance data on international trade and inventories and the Kansas City Federal Reserve survey.

•  On Friday, investors will get the first look at economic growth data for the March quarter. There are three estimates of GDP – advance, preliminary and final estimates. On the same day the quarterly employment cost index is issued – a key gauge of wages (or compensation). When wages start lifting at a faster rate, interest rates won’t be far behind. The next Federal Reserve meeting is May 2-3.

•  Also on Friday is the Chicago purchasing managers index and the consumer sentiment measure from the University of Michigan.

Financial markets

•  The US profit reporting (earnings) season is in full swing in the coming week.

•  Amongst stocks reporting on Monday are Halliburton, Kimberly-Clark, Alcoa, Barrick Gold and Newmont Mining.

•  On Tuesday, reporting firms include 3M, Baker Hughes, Caterpillar, Coca Cola, DuPont, Eli Lilly, Lockheed Martin, McDonald’s, Office Depot, AT&T and US Steel.

•  On Wednesday, profit results include those from Fiat Chrysler, PepsiCo, Twitter, T-Mobile and Procter & Gamble.

•  On Thursday, earnings will come from American Airlines, Domino’s Pizza, Ford Motor, UPS, Under Amour, Amazon, Microsoft, Intel and ResMed.

•  And on Friday, financial updates will come from Chevron, Colgate Palmolive, Exxon Mobil and General Motors.

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