Investor Signposts 26 Nov 18: Business investment & construction work done the highlights
CommSec Senior Economist Ryan Felsman previews the economic data scheduled for the week ahead including the Business investment, construction work done and credit growth data.
Watch Video: https://youtu.be/aaFlyKirNfg
Australia: Business investment, construction work done and credit growth data in focus
• A relatively quiet week beckons in Australia in terms of new economic data. Business investment, construction work done and private sector credit figures are of most interest. And Reserve Bank Governor Philip Lowe speaks.
• The week kicks off on Monday in Australia when Reserve Bank Governor Philip Lowe speaks at the Australian Payment Summit in Sydney at 9.15am AEDT. Another Reserve Bank speech follows in Sydney with Assistant Governor (Financial Markets) Christopher Kent scheduled to talk at the Australian Securitisation Forum 2018 Conference at 2.00pm AEDT.
• On Tuesday, the regular weekly reading on consumer confidence is published by ANZ and Roy Morgan.
• On Wednesday the Bureau of Statistics (ABS) releases the Construction Work Done figures for the September quarter. The estimates on residential building is incorporated in the dwelling investment component of the quarter’s economic growth data.
• Construction work done rose by 1.6 per cent in the June quarter – the sixth increase in seven quarters – but was down by 0.1 per cent on a year ago. Strong population growth and government spending have supported a large pipeline of building activity. Construction work done in NSW and Victoria were at record highs in the June quarter. And new home building rebounded during the quarter.
• Engineering project activity continues to be supported by an extensive pipeline of national public-transport related infrastructure investment through to 2025. That said, the Australian Industry Group’s Performance of Construction Index – a leading indicator – has contracted for two consecutive months (to October 2018) after 19 months of growth, signalling a loss of momentum in construction activity.
• On Thursday, the ABS releases the Private Capital Expenditure publication (business investment figures) for the September quarter. New business investment (spending on buildings and equipment) fell by 2.5 per cent in the June quarter to be up 0.4 per cent over the year. Also the third estimate of investment in 2018/19 was $101.997 billion and was 1.1 per cent lower than the third estimate for 2017/18. The 16.1 per cent lift in expectations for 2018/19 was the second biggest increase for a June quarter in seven years – above the decade average of 12.4 per cent.
• On Friday the Reserve Bank issues the Financial Aggregates publication, a report that includes the private sector credit measure (effectively ‘loans outstanding’) for October. Tighter lending conditions have reduced home price and credit growth. Investor housing finance rose 0.1 per cent in September with annual growth at the slowest rate on record of 1.4 per cent, potentially reducing the risk of speculative investment lending.
US economic growth, Federal Reserve meeting minutes and Chinese factory data in focus
• In the US the release of the minutes from the last Federal Reserve meeting will attract interest, while the second estimate of September quarter US economic growth dominates the data docket. Monthly activity gauges from the National Bureau of Statistics of China round out the month.
• The week kicks off on Monday in the US when the Chicago Federal Reserve National Activity Index is issued. And another influential manufacturing gauge from the Federal Reserve Bank of Dallas is also released.
• The usual weekly data on US chain store sales is released on Tuesday along with September home prices data. US national home prices have begun to moderate with the annual growth of the S&P Case-Shiller home price index easing to 5.8 per cent over the year to August, down from a 6.0 per cent annual gain in July.
• Also on Tuesday in the US, the Conference Board provides an update on consumer sentiment. The confidence index increased by 2.6 points to an 18-year high of 137.9 in October, driven by a robust labour market.
• On Wednesday in the US, the second estimate of economic growth for the September quarter is released. Annual GDP growth is expected to lift to 3.6 per cent from the ‘advance’ estimate of 3.5 per cent.
• Also on Wednesday, weekly MBA mortgage applications, the October trade in goods data and monthly new home sales figures are issued. The purchase of new single-family homes fell by 5.5 per cent to an annual rate of 553,000 units in September as rising mortgage rates, supply shortages and a lack of affordability crimped buyer demand. But demand is forecast to rebound by 5.3 per cent in October following Hurricane-related disruptions.
• On Thursday in the US, the October data on personal income and spending are released, together with weekly data on new claims for unemployment insurance. But inflation measures – especially the core personal consumption deflator (excluding food and energy prices) – will be a key focus for investors. The core PCE deflator is expected to remain steady at its 2 per cent annual target for a sixth successive month in October.
• Also on Thursday the Federal Reserve releases minutes of the last policy-setting meeting held over November 7-8. Analysts will be looking for anything that confirms views that a rate hike will be delivered next meeting.
• On Friday in the US, the Chicago purchasing managers’ index for November and pending home sales data are released.
• Also on Friday Chinese official factory and services gauges are released, rounding out the month of November.
Important Information: The summary and attached report has been prepared without taking account of the objectives, financial situation or needs of any particular individual. For this reason, any individual should, before acting on the information in this report, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice. In the case of certain securities Commonwealth Bank of Australia is or may be the only market maker.