Investor Signposts: Week Beginning September 30 2019

CommSec Senior Economist Ryan Felsman previews the economic & financial market events scheduled for the week ahead including the Reserve Bank interest rate decision, CoreLogic Home Value index & US Non-farm payrolls.

Australia: Interest rate decision grabs centre-stage

• ‘Top shelf’ economic data returns to the economic release schedule for the coming week – international trade, retail trade and building approvals. The Reserve Bank interest rate decision is made on Tuesday.

• The week kicks-off on Monday when the Reserve Bank releases the data on private sector credit (effectively, ‘loans outstanding’). Lending is growing at the slowest pace for over five years.

• Also on Monday, the Melbourne Institute releases its monthly inflation gauge.

• On Tuesday there is a log-jam of data and events – so much so that it can be better described as ‘Super Tuesday’.

• Certainly the Reserve Bank Board hands down its interest rate decision. And we believe there is a solid chance the RBA will cut interest rates by another quarter of a per cent.

• The Reserve Bank Governor also delivers a speech on Tuesday evening in Melbourne.

• In terms of economic data, the CoreLogic Home Value index is issued. A solid 0.8 per cent lift in prices is possible.

• Also on Tuesday, AiGroup and Commonwealth Bank release their separate survey results of purchasing managers in the manufacturing sector. And the Bureau of Statistics (ABS) issues its August data on building approvals.

• In terms of the results: manufacturing continues to struggle and the annual total of home building approvals has returned to longer-term averages.

• On Thursday, another treasure-trove of data is released. The ABS issues the August international trade figures – exports and imports. Both AiGroup and Commonwealth Bank release their separate survey results of purchasing managers in the services sector. And the Federal Chamber of Automotive Industries issues the September data on new vehicle sales. There is evidence that luxury car sales are lifting, raising the potential for a broader lift in new vehicle purchase.

• And on Friday, the ABS issues the retail spending figures for August. Investors will be closely looking for evidence that Aussie taxpayers are starting to spend their tax offset payments. The Commonwealth Bank Group economists believe that spending is indeed starting to lift, tipping a 0.9 per cent lift in retail spending in the month. It’s worth noting though that retail spending is only 30 per cent of overall household spending.

• Also on Friday, the Reserve Bank releases the Financial Stability Review – a half-yearly “assessment of the current condition of the financial system and potential risks to financial stability.” And Reserve Bank Assistant Governor, Luci Ellis, also delivers a speech in Geelong on Friday.

Overseas: Jobs, manufacturing and services

• At the start of every month, surveys of purchasing managers dominate the statistical scoreboard. And the month of October is no exception. The other event to dominate attention is the US jobs report on Monday.

• The week begins on Monday when closely-watched regional activity gauges are released. The Chicago purchasing managers index is released with the Dallas Federal Reserve manufacturing index.

• In China on Monday, the National Bureau of Statistics releases the purchasing manager index (PMI) results covering manufacturing and services. The services gauge in August was 53.8 – well above the 50 line that separates expansion from contraction. Caixin also releases its PMI for the manufacturing sector.

• On Tuesday, it is the turn of the US to issue PMI results with both the Institute of Supply Management (ISM) and Markit releasing their gauges of activity in the manufacturing sector.

• Also on Tuesday, the regular weekly reading on US chain store sales is due together with September sales data for new autos (or motor vehicles) and construction spending.

• On Wednesday in the US, the weekly reading on mortgage applications is issued as well as the ISM New York index and the ADP survey of private sector payrolls. The ADP report doesn’t always line up with the “official” jobs report, but investors still closely assess the data.

• On Thursday, attention shifts to the purchasing manager surveys covering the services sector. Both ISM and Markit PMI results for services are issued in the US. The usual weekly data on claims for unemployment insurance (jobless claims) is also issued with factory orders and the Challenger series on job cuts.

• On Friday, the spotlight is well and truly on the US job market. Most investors are fixated on the rate of job growth (unlike here in Australia). And at this stage, economists are tipping a 166,000 lift in jobs or non-farm payrolls.

• But also in focus are wages (average hourly earnings), hours worked and the jobless rate – not far off 50-year lows.

• Also on Friday, trade data (exports and imports) for August is issued. The US continues to run a large trade deficit and the shortfall remains a preoccupation of US President Trump’s administration.