CommSec Senior Economist Ryan Felsman previews the economic & financial market events scheduled for the week ahead including the June employment report, NAB business survey & US Retail sales.
Australia: Jobs data dominates
• In the coming week there is little in the way of top-tier economic data. But the all-important June employment report will hog the headlines towards the end of the week. Before this, the minutes of the Reserve Bank’s July 2 Board meeting – where interest rates were cut for a second successive month – are issued on Tuesday.
• The week kicks off on Tuesday when the weekly series of consumer confidence will be released from Roy Morgan and ANZ. Consumers have been given a ‘shot in the arm’ by income tax and mortgage rate cuts, boosting their potential purchasing power.
• Also on Tuesday, the Reserve Bank Board’s July 2 monetary policy meeting minutes will be closely observed. At that meeting the cash rate was cut by 25 basis points to a record low 1 per cent. It was the first back-to-back rate cut since mid-2012.
• But Reserve Bank Governor Philip Lowe has since signalled that he may sit pat in the near term, choosing to “closely monitor how things evolve over the coming months”. While developments in the labour market remain the Bank’s key focus, the June quarter update on inflation looms large at month-end.
• On Wednesday, Westpac and the Melbourne Institute releases the Leading Index for June. The May reading of -0.1 per cent implies a continuation of sub-trend economic growth into the second half of 2019.
• On Thursday the NAB releases the June quarter survey of business confidence and conditions.
• Also on Thursday, the employment report for June is issued. Both the unemployment and underemployment rates have ticked up in recent months. And leading indicators of jobs growth have weakened. The participation rate has hit record highs.
• The Reserve Bank has cited spare capacity in the labour market for successive quarter per cent rate cuts in June and July. Commonwealth Bank economists have forecast 5,000 jobs to have been created in June with the unemployment rate stuck at 5.2 per cent for a third consecutive month – above the Reserve Bank’s 4.5 per cent “full employment” target.
Overseas: China economic growth data in focus
• Chinese economic growth and activity data are amongst the highlights in the coming week. In the US, retail spending and the Federal Reserve’s Beige Book will be keenly observed ahead of the next interest rate decision.
• The week begins on Monday in China with economic growth data for the June quarter. The economy grew at a 6.4 per cent annual pace in the December quarter, the slowest growth rate since March 2009. And growth is expected to slow even further to around 6.3 per cent after the hike in US tariffs on US$200 billion worth of Chinese goods and services in May weighed heavily on China’s factories and the export sector.
• In addition, Chinese retail sales is tipped to have grown at an 8.5 per cent annual pace in June with production up 5.3 per cent and investment up 5.6 per cent. Home prices are tipped to grow by around 11 per cent over the year.
• On Monday in the US, the influential New York Federal Reserve Empire State Manufacturing Index is issued.
• On Tuesday, the regular weekly reading on US chain store sales is due, along with retail sales, trade prices, industrial production, capacity utilisation, business inventories and homebuilder sentiment data. Retail spending is tipped to lift by 0.2 per cent – the fourth successive monthly gain – after a solid 0.5 per cent jump in May.
• On Wednesday, the weekly mortgage applications figures from the US Mortgage Bankers Association are due. The June readings on housing starts and building permits are issued. The US Federal Reserve’s Beige Book will be scrutinised for an expected improvement in the economic outlook across districts after trade tensions between the US and China receded at the G20 Summit in Osaka, Japan. But modest growth is expected later this year.
• On Thursday, the weekly figures on new claims for US unemployment insurance are issued, along with factory data from the Philadelphia Federal Reserve. The Conference Board’s Leading Index is also issued. The index was unchanged in May – the first month without an increase since January.
• On Friday, the University of Michigan releases its preliminary July estimate of consumer sentiment.
US earnings season
• The US profit reporting (earnings) season gets into full swing in the coming week. S&P 500 companies are expected to report a 2.5 percent fall in second quarter earnings growth according to Bloomberg data.
• Amongst companies reporting on Monday: Charles Schwab, iHealthcare, JB Hunt Transport, QBioMed.
• Tuesday: BlackRock, Domino’s Pizza, Goldman Sachs, Johnson & Johnson, JPMorgan Chase, Morgan Stanley, Netflix, United Airlines, UnitedHealth, Wells Fargo.
• Wednesday: Alcoa, Bank of America, IBM, Kaiser Aluminium, Steel Dynamics, Texas Instruments, United Rentals.
• Thursday: AMEX, Bank of New York Mellon, Microsoft, PayPal, Philip Morris, Skyworks Solutions, Snap-on, Travelers.
• Friday: Cleveland-Cliffs, E*Trade, eBay, Honeywell, Schlumberger, State Street.
Published by Ryan Felsman, Senior Economist, CommSec