Australia: Reserve Bank in focus

• The 2019/20 financial year commences with a ‘tier-1’ data deluge, including figures on home prices, building approvals, international trade, job vacancies, retail trade and purchasing manager indexes. But the Reserve Bank Board’s interest rate decision on Tuesday will dominate market attention.

• The week kicks off on Monday with the release of manufacturing surveys from AiGroup and CBA. CoreLogic’s home prices data and the Melbourne Institute’s inflation gauge are both issued for June.

• In June, national home prices may have fallen by around 0.3 per cent. Flat outcomes in Sydney and Melbourne are expected, but prices continue to fall in Perth, Brisbane and Adelaide.

• That said, housing market sentiment has improved following the Reserve Bank’s June 4 interest rate cut, the Federal Election result and APRA’s easing of mortgage serviceability requirements. And auction clearance rates have lifted to 60-65 per cent in Sydney, but the volume of homes listed remains subdued.

• On Tuesday the Reserve Bank meets in Darwin and Governor Philip Lowe speaks at the Board dinner held with the business community at 7.30pm AEST. Economists believe it will be a close call whether the Board cuts the cash rate by a further 25 basis points to 1.00 per cent, despite the policymakers’ easing bias.

• Also on Tuesday, the weekly Roy Morgan-ANZ measure of consumer sentiment is released.

• On Wednesday, both AiGroup and the CBA release the June surveys on services activity. And the Federal Chamber of Automotive Industries issues the June data on new vehicle sales.

• Also on Wednesday, one of the major leading indicators for home building – council approvals to build new homes – is released together with international trade data. Approvals fell by 4.7 per cent in April to be down by 24.2 per cent over the year. On the trade front, Australia recorded its 16th successive monthly surplus in April.

• On Thursday, retail trade and job vacancies figures are both issued by the Bureau of Statistics. Job vacancies rose by 1.3 per cent to a record 241,600 in the three months to February. Vacancies were up by 13.9 per cent on a year ago, but some loss of momentum is expected if other leading indicators of jobs growth are any indication.

• On Friday, AiGroup’s Performance of Construction Index is due for the month of June, rounding-out a busy week.

Overseas: US jobs data awaited after the Independence Day holiday

• US financial markets are closed for Independence Day on Thursday. China’s official factory gauge will dominate headlines at the beginning of the week. But after a mixed report in May, investor attention will be firmly focused on Friday’s release of the June jobs report in the US. A further loss of job market momentum could encourage the US Federal Reserve to potentially cut interest rates in late July.

• The week begins on Sunday in China when the official manufacturing and services gauges are both issued for June. Concerns over a ‘double dip’ in China’s economy could re-intensify should a weakening in domestic demand and new export orders result in a successive contraction in monthly factory activity in June.

• On Monday and Wednesday in China, the private sector focused Caixin surveys on manufacturing and services activity are due. Despite recent steady readings, business activity from private sector exporters and firms could contract in June due to external sector weakness on the back of the intensification of China-US trade tensions.

• On Monday in the US, the highly influential ISM manufacturing gauge is issued for June, along with figures on construction spending. In May, the ISM manufacturing index fell to its lowest level since October 2016, signalling a weakening of conditions in the US factory sector. Construction spending, however, was flat in April.

• On Tuesday, the regular weekly reading on chain store sales is due. But most focus will be on the ISM New York and IBD/TIPP Economic Optimism Indexes. An update on vehicle sales is also provided by Ward’s Automotive.

• On Wednesday in the US, the weekly mortgage applications figures from the Mortgage Bankers Association are due. In a busy day of data releases prior to the July 4 public holiday, an update on job losses from global outplacement firm Challenger, Grey and Christmas for June is provided.

• Also on Wednesday, the weekly figures on new claims for unemployment insurance are issued, along with factory orders, the international trade data and the ISM non-manufacturing index. And ADP’s private sector payrolls figures are issued with job gains of 150,000 tipped in June following gains of just 27,000 in May.

• On Friday, the all-important employment report is issued for June. Just 75,000 jobs were added in May – well below market expectations for gains of 175,000. In June, 163,000 jobs are tipped by economists to have been created with the unemployment rate steady at 49½-year lows of 3.6 per cent.

• After a stellar 103 consecutive months of job gains – an historic record – increasing labour cost pressures and skills shortages appear to hampering US job growth. And a weakening in annual wage growth to 3.1 per cent – the weakest rate since September – combined with job losses in New York, New Jersey and Connecticut in May, imply some loss of labour market momentum in recent months.

Published Ryan Felsman, Senior Economist, CommSec