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Savanth Sebastian – Economist – CommSec

Spotlight on wages in Australia

• In Australia over the coming week wage data will be in focus. Overseas in the US the main interest will be in the minutes of the last Federal Reserve Open Market Committee meeting. While in China the usual monthly download of Chinese economic data – including retail sales, production and investment are slated for release on Monday.

• In Australia the week kicks off on Monday when the Reserve Bank releases the latest data on credit and debit card lending. In May, the average credit card balance in smoothed terms was down 0.7 per cent on a year. Consumers are still winding back credit and are reluctant to take on additional debt.

•  On Tuesday, not only will the minutes of the last Reserve Bank Board meeting be released but data on car sales and consumer confidence will be issued and dissected by investors and analysts.

• The Reserve Bank has already released the quarterly Statement on Monetary Policy. So the main interest in the Board minutes will be any insights from the Reserve Bank on the high Australian dollar as well as “liaison” with businesses or retailers.

• The Australian Bureau of Statistics (ABS) provides seasonally adjusted and trend estimates on auto sales. The industry data has already revealed that sales were at record highs for a July month. Annual sales of SUVs and “other vehicles”, like utes, are also holding at record highs.

• On Wednesday, the main measure of wages is released by the ABS – the wage price index. While many remark at the ‘extraordinary’ situation of super low wage growth it is still the fact that wage growth outpaces some of the key inflation measures. We tip wage growth of 0.5 per cent in the quarter and 1.9 per cent growth over the year. The strength in employment growth and sliding unemployment is unlikely to lift wage growth in the near-term.

• On Thursday there are two pieces of economic data. Most focus will be on the July jobs report. But the estimates of average weekly earnings are also issued.

• First to the jobs data. Over the past two months almost 100,000 jobs have been created. In addition unemployment is falling and hours worked are up 1.3 per cent over the year – the best annual growth in 11 months. The forward indicators like job ads and business surveys continue to point to a stronger job market. For the record we expect that jobs may have lifted by 20,000 in July and the jobless rate may have eased from 5.6 per cent to 5.5 per cent..

• The average weekly earnings data is released every six months. However the figures are important in that they provide dollar estimates of wages in the economy across states and industries.

Spotlight on US and Chinese data

• In the coming week in the US, various ‘top shelf’ indicators are expected like retail sales. But most analysts and investors will spend time dissecting the minutes from the last Federal Reserve meeting.

• The week kicks off in China on Monday, with the release of July data on retail sales, industrial production and investment – potentially market-moving for the Aussie dollar and commodity prices. Annual Chinese economic growth has been slowing, but that is ‘normal’ for a maturing economy. More importantly annual retail sales is now holding at an 18-month high. Also lending and money supply data is between Saturday and Wednesday.

• In the US on Tuesday, there are five ‘top shelf’ indicators – import price index, empire manufacturing, retail sales, the NAHB housing market index and business inventories are released. Most interest will focus on the retail sales result, which is expected to show a lift of 0.4 per cent in July after the 0.2 per cent fall in June.

• On Wednesday, June readings on bond buying and longer-term capital flows will be released alongside more data on the housing sector – building permits and housing starts. Building permits are expected to ease by 2.4 per cent in July, while housing starts are forecast to lift by 0.7 per cent, following the 8.3 per cent lift in July. Overall the housing sector remains healthy although the inventory of homes for sale remains below longer-term averages.

• Also on Wednesday, the minutes (details) of the July 25/26 Federal Reserve meeting are issued. It is widely expected that the Fed will leave interest rate settings unchanged until December at the earliest. However the focus of the minutes is likely to be on the timing of the when the Fed will wind back its bond buying program.

• On Thursday, the weekly figures on claims for unemployment insurance are released together with the Philadelphia Federal Reserve survey, industrial production and the leading index. The “Philly Fed” index is tipped to ease from +19.5 to +19 in August, while the leading index is expected to post a 0.3 per cent gain in July after the outsized 0.6 per cent gain in June.

• On Friday, the University of Michigan releases preliminary estimates of consumer sentiment for August.

Sharemarket, interest rates, currencies & commodities

• The Australian earnings season cranks up in the coming week. Amongst companies reporting results: Newcrest mining, Ansell, Bendigo & Adelaide Bank, JB Hi-Fi, and Aurizon (Monday); Challenger, Propertylink Group, and GPT Group (Tuesday); CSL, Computershare, Woodside Petroleum, Vicinity Centres, Invocare, Sonic Healthcare, AVEO Group, Dexus Property Group, Origin, Fairfax, Fletcher Building, PACT Group, SEEK, Iluka Resources and Stockland (Wednesday); Whitehaven Coal, Mirvac Group, ASX, Telstra, Cochlear, Webjet, Tatts Group, Treasury Wine Estates, QBE Insurance Group, Wesfarmers, Investa Office Fund, IPH, Adelaide Brighton and IRESS (Thursday); Spark New Zealand, Primary Health Care and Mantra Group (Friday).

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