Australia: Jobs, consumer and business confidence surveys dominate

• After the Queen’s Birthday public holiday on Monday, a raft of business and consumer surveys are released. A post-Federal election bounce is expected, but all eyes will be on the May employment report issued on Thursday.

• The week kicks off on Tuesday when the NAB business survey is released. A rebound in business confidence is expected following the re-election of the Coalition government. The confidence index was just above 5½-year lows at -0.3 points in April due to policy uncertainty. And the employment sub-index fell to a 3½-year low of -1.2 points in April, signalling some weakness in hiring intentions.

• On Wednesday the Roy Morgan-ANZ weekly measure of consumer sentiment is released, followed by Westpac-Melbourne Institute’s monthly reading on consumer confidence. The Westpac-Melbourne Institute sentiment index rose by 0.6 per cent to 101.3 in May – near its long-run average.

• Both surveys will be keenly observed for consumer reactions to the Federal election result and the Reserve Bank’s (RBA) cut in interest rates. Credit conditions in the property market are expected to improve after major banks reduced mortgage rates and the Australian Prudential Regulatory Authority (APRA) announced an easing in home loan serviceability requirements.

• Also on Wednesday, the Australian Bureau of Statistics (ABS) releases April data on overseas arrivals and departures. Over the year to March, tourist arrivals were down by 0.8 per cent – the weakest annual rate in 7½ years. Departures were up by 1.3 per cent, but grew at the slowest annual rate in 13 months.

• RBA Assistant Governors Luci Ellis and Christopher Kent provide speeches in Melbourne on Wednesday. Dr. Ellis’ speech is titled “Watching the Invisibles” at The Freebairn Lecture in Public Policy. While Dr. Kent speaks at the Australian Renminbi Forum.

• The Reserve Bank issues the credit and debit card statistics for April also on Wednesday.

• On Thursday the employment report for May is issued. Jobs increased for a ninth straight month, up by 28,400 in April. The report, however, may have been distorted by seasonal effects from the extended Easter-Anzac Day holiday period and lead-up to the Federal election with part-time jobs up by 34,700.

• But it appears that the primary catalyst for the RBA’s interest rate cut appears to be the tick up in the jobless rate and loss of momentum in leading indicators of hiring intentions. In April, the unemployment rate rose from 5.1 per cent to 5.2 per cent in seasonally adjusted terms. And measures of spare capacity – underutilisation and underemployment – both lifted. Policymakers now believe a lower jobless rate near 4.0-4.5 per cent will stoke inflation. We expect that 15,000 jobs were created with the jobless rate stable at 5.2 per cent in May.

Overseas: US retail spending and China monthly activity data in focus

• Chinese economic data releases dominate the overseas calendar over the coming week. Trade, inflation and the May activity data are all scheduled. In the US, inflation, industrial production and retail spending figures will all be keenly observed by investors.

• The week begins on Monday in China when trade data is released. Both exports and imports are expected to fall by 4 per cent over the year to May as US trade tensions re-escalate and global demand weakens.

• Also on Monday in the US is data on job openings. The quits rate was steady at 2.3 per cent in March – the equal highest level during the current economic expansion. There were 7.49 million job vacancies in March.

• On Tuesday in the US, data on small business sentiment and business inflation are scheduled. Renewed trade tensions with China could sap confidence from small firms in May. Producer prices are expected to remain muted.

• On Wednesday, the focus switches back to China when inflation data is issued. Headline consumer prices lifted by 2.5 per cent over the year to April on the back of a 14.4 per cent acceleration in pork prices due to the African swine flu epidemic. But producer prices remain sluggish, limiting industrial profit growth.

• Also on Wednesday, the latest update on US consumer prices and the monthly US budget statement are issued. While a sustained lift in inflation remains elusive, prices could rise in the coming months after tariffs on Chinese imports were increased in May. But US Federal Reserve Chair Powell believes that low inflation is “transitory”.

• On Thursday, US trade prices (exports and imports) data is scheduled for May.

• On Friday in the US, the all-important retail sales, consumer confidence and industrial production figures are released. Retail spending fell by 0.2 per cent in April. But a 0.7 per cent pick up is forecast by economists in May, supported by a robust job market with unemployment near 50-year lows.

• Also on Friday in China, the May activity data is scheduled. Key indicators of the Chinese economy, such as credit growth, industrial profits, manufacturing activity and investment growth all weakened before the escalation in US trade tensions.

• A rebound in consumer spending, however, is forecast by economists with production and investment growth remaining relatively stable in May, supported by continued policy stimulus.

Published by Ryan Felsman, Senior Economist, CommSec