Federal Budget in focus
• It generally only dominates attention for one day of the year, but the Federal Budget will be in focus in the coming week. But there are also plenty of ‘top shelf’ indicators to watch including retail trade.
• The week kicks off on Monday with the release of building approvals data from the Australian Bureau of Statistics (ABS) as well as the job advertisements data from ANZ. The approvals data – council approvals to build new homes – is volatile. But overall it appears that the building cycle has peaked. In February new approvals rose by 8.3 per cent and we expect that they eased 5 per cent in March.
• Job ads have followed a zig-zag course over the past four months, lifting 0.3 per cent in the latest month of March. Business surveys suggest that hiring is starting to lift again.
• On Tuesday there is a raft of data during the day to be followed by the release of the Federal Budget at 7.30pm. The National Australia Bank business survey is released with weekly consumer confidence and retail trade.
• In March the NAB business conditions index rose from +9.3 points to +14.2 points (long-term average +5.0 points), a 9-year high. The business confidence index eased from +6.7 points to +6.1 points. The latest Performance of Manufacturing survey suggests businesses continue to do well.
• Retail trade may have lifted by 0.3 per cent in March after a 0.1 per cent gain in February. Certainly the Business Sales index from Commonwealth Bank pointed to an uptick in spending in the month. Consumers are generally cautious about spending with low nominal wage growth dominating focus rather than the modest growth of consumer prices.
• The Federal Budget will get the usual attention from the media on Tuesday night and Wednesday. The key point being that budget announcements are just the start of a long process of securing agreement from the Senate. The global and domestic economies continue to improve and this will hopefully translate to firmer growth of revenues.
• After the raft of economic events on Tuesday there is then a gap to the next data offerings on Friday. The ABS releases the Overseas Arrivals and Departures publication that has information on both tourism and migration flows. And on the same day the Reserve Bank releases the monthly credit and debit card statistics that include data on the use of automatic teller machines (ATMs)
• Tourist arrivals rose by 0.4 per cent in February. And departures fell by 2.3 per cent. Arrivals are up 10.5 per cent on the year with departures up 4.7 per cent. Tourists from China and Hong Kong rose to a record 1,483,400 over the past year, up 13.5 per cent over the year.
• Consumers continue to cut back of credit card debt. In smoothed terms (12-month average) the average balance was down by 1.1 per cent in February.
Overseas: US inflation; China trade and inflation
• Overseas, inflation data will be released in both China and the US. Retail sales data will also of interest in the US. And in China, trade figures will attract attention.
• The week begins on Monday with trade data (exports and imports) slated for release in China. And in the US the employment trends index is issued.
• On Tuesday in the US a number of indicators are released that would be best described as “second tier”. The National Federation of Independent Businesses (NFIB) release the business optimism survey. Revised data on wholesale sales and inventories is also released. A forward-looking gauge on the job market is also scheduled – the JOLTS survey of job openings. And the usual weekly figures on chain store sales are issued.
• In China on Wednesday, the April data on producer prices and consumer prices is released. Producer prices are up 7.6 per cent on a year ago – just off the fastest rate in eight years. But consumer prices are only 0.9 per cent higher than a year ago.
• In the US on Wednesday, the usual weekly data on mortgage applications is released together with data on import and export prices and monthly figures for the Federal Budget.
• On Thursday in the US data on producer prices is issued with the usual weekly data on claims for unemployment insurance.
• And on Friday, the consumer price index is issued with retail sales and consumer sentiment. The core measure of prices (excludes food and energy) may have lifted 0.2 per cent in April, leaving the annual rate at 2 per cent. And just like in Australia, US consumers are spending only cautiously with non-auto (car) sales largely flat in March. Interestingly the softness of spending stands in contrast to healthy consumer sentiment.
• There are approximately five speeches by US Federal Reserve presidents over the week.
• The Australian sharemarket has generally done well during the month of May – not great, but not badly either. Over the past 70 years the sharemarket has lifted 46 times for an average monthly gain of 0.5 per cent. The extra piece of good news is that the sharemarket has lifted in May over the past three years.