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Investor Signposts 23 September 19: Reserve Bank Governor speech in focus

CommSec Senior Economist Ryan Felsman previews the economic & financial market events scheduled for the week ahead including the Reserve Bank Governor’s speech, Job vacancies & China Industrial profits.

Australia: Reserve Bank Governor speech in focus

• A relatively quiet week is in prospect. The Reserve Bank Governor’s speech will be a key focus for investors. No ‘top shelf’ economic data is scheduled, but job vacancies, infrastructure spending and wealth figures are all due.

• The week kicks-off on Monday when the CommBank releases its ‘flash’ manufacturing and services purchasing manager indexes for September. Services sector activity contracted, but factory activity continued to expand in August.

• On Tuesday weekly consumer confidence data is issued by ANZ and Roy Morgan. Sentiment is being influenced by a confluence of factors, but modest wages growth and elevated mortgage debt are primarily responsible for consumer caution.

• Also on Tuesday the Reserve Bank Governor Philip Lowe gives a speech – An Economic Update – at the Armidale Business Chamber dinner at 7.55pm AEST. Dr. Lowe’s commentary will be heavily scrutinised by economists and investors for clues on the direction of interest rates (‘forward guidance’) ahead of the next Reserve Bank Board meeting on October 1. CommBank Group economists expect a rate cut on November 5.

• On Wednesday, the Department of Employment’s skilled internet job vacancies data is scheduled for August. Vacancies lifted by 0.4 per cent in July – the biggest monthly lift since November.

• Also on Wednesday, the Bureau of Statistics (‘ABS’) releases June quarter data on Engineering Construction. As well as providing data on recent activity, there are estimates of the amount of construction remaining to be done. Excluding the resource sector, work yet to be done stood at a record high of $47 billion in the March quarter. A record $36.6 billion of engineering work is yet to be done in NSW and Victoria.

• On Thursday, the ABS releases detailed estimates on the job market for August. The data will include industry estimates of employment. Job vacancies data for the three months to August is also due. Vacancies have eased from record highs.

• Also on Thursday, the ABS issues the ‘Finance and Wealth’ estimates for the June quarter. The report includes data on household wealth, which will be impacted by falling home prices but lifting sharemarkets in the quarter.

Overseas: Reserve Bank of New Zealand interest rate decision and US housing highlights

• US economic growth, inflation, trade and housing data will all feature in the final week of September. All eyes will be on the Reserve Bank of New Zealand’s interest rate decision on Wednesday.

• The week begins on Monday when IHS/Markit issues preliminary manufacturing purchasing manager indexes across the globe. Factory activity is contracting in export-focused economies, such as Germany, China and Japan due to the US-China trade war and slowing consumer demand for new motor vehicles and smartphones.

• Also on Monday in the US, the August activity index is produced by the Chicago Federal Reserve. The index draws on 85 economic indicators with 59 making negative contributions in July.

• On Tuesday, the regular weekly reading on US chain store sales is due together with the Richmond Federal Reserve’s factory gauge and home prices data from S&P/Case-Shiller and the Federal Housing Finance Agency.

• Also on Tuesday, the Conference Board’s Consumer Confidence index is due. In August, the Board’s ‘jobs plentiful’ index (which measures the abundance of job offerings) rose by 5.6 points – the largest increase in series’ history dating back to the mid-1970s. Consumer confidence is just below cyclical highs reached in October 2018.

• On Wednesday in New Zealand, the Reserve Bank Monetary Policy Committee is expected to keep the official cash rate at 1 per cent. But the Bank surprised economists with a 50 basis point rate cut in August motivated by a desire to support the jobs market and to nudge inflation up towards the midpoint of its 1-3 per cent target range. CommBank Group economists expect a further 25 basis point cut in November.

• On Wednesday in the US, the weekly reading on mortgage applications is issued as well as new home sales data. Sales fell in July after an upward revision in June brought those sales to the highest level since 2007. According to the Mortgage Bankers Association, average 30-year mortgage rates have fallen to near three-year lows at 3.8 per cent after the US Federal Reserve cut rates in July.

• On Thursday, the weekly figures on jobless claims are issued in the US, along with data on economic growth, manufacturing (Kansas City Federal Reserve), international trade, wholesale inventories and pending home sales. The third estimate of US GDP growth for the June quarter is expected to show continued resilience with annual growth of around 2.0 per cent forecast by economists. Consumer spending was revised up in the second estimate and corporate profits lifted.

• On Friday, data on US personal income and spending are issued for August. The data is important as it contains the Federal Reserve’s preferred measure of inflation – the core personal consumption deflator. And figures on durable goods orders – seen as a proxy measure of business investment – are due. Firms’ spending remains weak due to uncertainty around trade policy.

• Also on Friday in China, August industrial profits data is scheduled. Profit growth is down 1.7 per cent in the seven months to July on a year earlier with the slowdown in industrial production continuing to weigh on profits and selling prices.

Published by Senior Economist Ryan Felsman, CommSec