Craig James – Chief Economist – CommSec

Job market in the spotlight

·       Only a spattering of economic statistics in Australia in the coming week. But dominating proceedings are minutes of the last Reserve Bank Board meeting and employment data. In the US, similarly minutes of the Federal Reserve meeting will be dissected while key data is released in China.

·       The week kicks off on Monday with data on new motor vehicle sales. Underpinned by the best affordability figures on record, new vehicle sales are at record highs with sports utility vehicles (SUV) the driving force. The data are the Bureau of Statistics (ABS) estimates on sales, based on earlier industry sales figures.

 

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·       On Tuesday, minutes of the last Reserve Bank Board meeting are released. The RBA has a ‘conditional easing bias’, but it doesn’t appear keen to act on that bias any time soon and cut rates.

·       Also on Tuesday the lending finance data is released by the ABS – the broadest measure of new loans being taken up by consumers and businesses. The latest data shows lending commitments are at 7½ year highs, primarily underpinned by business and housing loans. Also on Tuesday the weekly consumer confidence data is released.

·       The highlight in terms of economic data is the monthly employment report on Thursday. The resilience of the job market has been the main positive piece of economic news in 2015/16. Unemployment is at a 2-year low of 5.76 per cent with over 300,000 jobs created in 2015.

·       CommSec expects that 15,000 jobs were created in January with the jobless rate largely unchanged near 5.8 per cent. The Reserve Bank believes unemployment could trend lower in coming months, a forecast backed up by the latest data on job ads.

·       Also on Thursday, Reserve Bank Assistant Governor Malcolm Edey delivers a speech.

US and Chinese data; Spotlight on US Federal Reserve

·       There is the usual bevy of economic indicators to be released in the US in the coming week. And China emerges from the Lunar New Year holidays with the release of key economic data.

·       The week kicks off on Monday with the January trade figures to be released in China. Analysts are tipping the trade surplus to have narrowed from US$60.09 billion to US$58.85bn in January.

·       US markets are closed on Monday for the Presidents Day holiday.

·       On Tuesday in the US, the National Association of Home Builders index is released with the New York Federal Reserve index (Empire State index), capital flows data and weekly chain store figures.

·       On Wednesday most interest will be in the minutes of the last US Federal Reserve meeting. Economists are largely giving up on a March rate hike, but the commentary will be closely dissected.

·       Also on Wednesday in the US, the producer price index is issued with industrial production and housing starts. The usual weekly data on mortgage finance is also released. Housing starts may have lifted 2 per cent in January but production may have only crept 0.1 per cent higher in the month.

·       On Thursday in China the January inflation figures are released – both consumer and producer prices. Low inflation gives Chinese authorities flexibility to boost economic stimulus if required.

·       In the US on Thursday, the influential Philadelphia Federal Reserve index is released together with the leading index and the usual weekly data on new claims for unemployment insurance (jobless claims). The leading index may have eased 0.2 per cent in January.

·       And on Friday in the US, the January consumer price index is scheduled. The core measure (excludes food and energy) is expected to have lifted by 0.2 per cent in the month and 2.1 per cent over the year. The relative absence of inflation is the key reason that the Federal Reserve can take its time in lifting interest rates.

Sharemarkets, interest rates, exchange rates and commodities

·       The local profit reporting season gets into full swing in the coming week. As always the focus is on the latest earnings result, forward guidance and decisions made on dividends.

·       Amongst those reporting on Monday are Aurizon, Newcrest and Argo.

·       On Tuesday earnings results are expected from CSL, Bendigo & Adelaide Bank, GWA, Challenger, Star Entertainment, Reckon, Invocare, Pacific Brands and Paladin. A quarterly update is scheduled from National Australia Bank.

·       On Wednesday, amongst those expected to issue results are Amcor, A2 Milk, The Reject Shop, Insurance Australia, Lend Lease, Independence Group, Domino’s Pizza, Sonic Healthcare, Arrium, Coca Cola Amatil, Primary Health Care, Woodside Petroleum and Mount Gibson Iron. ANZ releases a trading update.

·       On Thursday, companies that are scheduled to report include GPT, Seven West Media, Telstra, Tatts Group, AMP, Webjet, Sydney Airport, QBE Insurance, Charter Hall and Origin Energy.

·       And on Friday, earnings are expected from Western Areas, Santos, Iluka, Fairfax Media, James Hardie, Medibank Private and Transpacific.

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