Australia: Spotlight on business investment and construction data

· In the coming week, there are a couple of indicators to be released that are key inputs into the September quarter economic growth (GDP) calculations – business investment and construction work activity.

· The week kicks-off on Tuesday when ANZ and Roy Morgan jointly release the weekly consumer confidence index. And Commonwealth Bank (CBA) Group economists are scheduled to release weekly credit and debit card spending data.

· Also on Tuesday, IHS Markit issues preliminary November purchasing managers’ indexes for the manufacturing and services sectors. Economic activity is expanding after prolonged lockdowns in the south-east, but cost pressures are persisting with input price inflation worsening due to pandemic supply chain disruptions.

· And to round off a busy Tuesday, the Reserve Bank (RBA) Head of Domestic Markets, Marion Kohler, delivers a speech – “Securities markets through the pandemic” – to the Australian Securitisation Forum Virtual Conference. And Andrea Brischetto, RBA Deputy Head Domestic Markets, participates in a panel discussion at the same conference with a focus on the “Transition to risk free rates – the future of BBSW.”

· On Wednesday, the Bureau of Statistics (ABS) releases the “Construction Work Done” publication for the September quarter. The report is important as the data on residential work is a key input into the economic growth calculations. In the quarter, CBA Group economists expect that construction work done fell by at least 6 per cent.

· Also on Wednesday, RBA Assistant Governor (Financial System), Michele Bullock, participates in two panel discussions – “Central Bank Digital Currencies” and “The Future of Payments in Australia” – at the Women in Payments online event.

· On Thursday, the ABS issues the September quarter data on business investment (“Private New Capital Expenditure and Expected Expenditure”). The report includes data on business spending on buildings and equipment and forecasts for spending over the next year. CBA Group economists expect that investment decreased by around 5 per cent in the quarter.

· Also on Thursday, the ABS publishes weekly payroll jobs and wage data for the fortnight ended October 30.

· On Friday, CBA Group economists expect that retail spending rose by 3.5 per cent in October.

Overseas: US Federal Reserve meeting minutes in focus ahead of Thanksgiving Day

· In the coming week, there is a logjam of US data to be released on Wednesday ahead of Thursday’s Thanksgiving Day holiday. And the US Federal Reserve’s (“FOMC”) November 2-3 meeting minutes feature on the same day.

· The week kicks off on Monday in China when 1- and 5-year loan prime rates are announced.

· On Monday in the US, the Chicago Federal Reserve national activity index is issued with data on existing home sales for October. Sales of previously-owned homes could ease by 1.4 per cent in October after soaring by 7 per cent in September – the most in a year – as lower mortgage rates boosted housing demand.

· On Tuesday across the developed world there will be release of ‘flash’ (or preliminary) November readings on activity in the manufacturing and services sectors, derived from surveys of purchasing managers.

· On Tuesday in the US, the weekly Johnson Redbook chain store sales figures are released with the Richmond Federal Reserve manufacturing index for November. The factory gauge rose from -3 to +12 in October.

· On Wednesday, the minutes of the last Federal Reserve meeting are issued. At the November 2-3 ‘get together’ the FOMC left its target range for the federal funds rate unchanged at 0-0.25 per cent. But the Fed said that it will begin reducing the pace of its monthly bond purchases starting “later this month.” The process will see reductions of US$15 billion each month from the current US$120 billion a month of purchases.

· The usual weekly data readings are also issued on Wednesday, including claims for unemployment benefits (initial jobless claims) and mortgage applications from the Mortgage Bankers Association (MBA).

· But headlining the US data releases is economic growth (gross domestic product or GDP). The second estimate of activity for the September quarter is issued with growth tipped to be up 2.2 per cent on a year ago.

· Other indicators to watch include durable goods orders; personal income and spending; new home sales; wholesale inventories; consumer confidence and the advance goods trade balance.

· Personal income is tipped by economists to edge higher by 0.2 per cent in October with spending up by 0.8 per cent. But most interest will be in the Fed’s preferred inflation measure – the Personal Consumption Expenditure (PCE) core deflator – which is expected to increase by 0.4 per cent in October to an annual rate of 4 per cent. The core price index, which excludes food and energy, rose 3.6 per cent from a year ago in September, the strongest annual pace since 1991.

· On Thursday, US financial markets are closed in observance of the Thanksgiving Day holiday.

Originally published by Ryan Felsman, Senior Economist, CommSec