Another rate hike is on the cards

A raft of ‘top shelf’ economic indicators will be released over the week while the Reserve Bank (RBA) Board also meets to discuss monetary policy settings.

The week kicks-off on Monday, with four key indicators to be released. The Australian Bureau of Statistics (ABS) issues Lending Indicators and Building Approvals for May. ANZ releases the June data on job advertisements. And the Melbourne Institute publishes the monthly inflation gauge for June.

At present the focus is on inflation, so the June inflation gauge will be closely watched, especially after the 1.1 per cent rise in May.

The lending indicators report will show the first response of borrowers to the May rate hike.

On Tuesday, the Reserve Bank (RBA) Board meets and a rate hike of 50 basis points or half a per cent is widely expected by economists. The RBA wants to quickly lift (‘front load’) rates to more ‘normal’ levels to slow the economy and stem inflationary pressures.

Also on Tuesday, three data releases are expected. ANZ and Roy Morgan release weekly consumer confidence. The ABS releases detailed retail trade figures. And the Federal Chamber of Automotive Industries issues the June data on new vehicle sales.

On Thursday, the ABS issues two reports: International Trade and Weekly Payroll Jobs and Wages. Trade
accounts are solidly in surplus. And while the weekly data on jobs and wages hasn’t yet provided fresh
insights on job market activity, it is still in relative infancy.

On Friday the ABS issues two reports: Monthly Business Turnover Indicator and Innovation in Australian Business. The former is of most interest: an “experimental indicator of business turnover derived from monthly Business Activity Statements.” Construction has been amongst the weakest industries, with turnover down 8.9 per cent in April and down 0.6 per cent on the year.

Overseas. US jobs data is the highlight. Also watch surveys of purchasing managers.

The Independence Day holiday is celebrated on Monday in the United States. Financial markets are closed.

In the US on Tuesday, the weekly Johnson Redbook chain store sales report is issued with the May data on
factory orders and June new vehicle sales. Consumers are still spending freely but factory orders are tracking sideways.

In China on Tuesday, the Caixin purchasing managers index for services is issued.

On Wednesday, the weekly data on mortgage applications is issued by the Mortgage Bankers Association. The Institute of Supply Management and S&P Global separately release results of surveys of purchasing managers that operate in the services sectors. The results may provide insights on the extent of price pressures.

Also on Wednesday, the Federal Reserve releases minutes of the June 15 FOMC policy-making meeting. And
the US Bureau of Labor Statistics issues the JOLTs report on job openings. Given the Federal Reserve has issued the comprehensive Monetary Policy Report to Congress, few fresh insights are expected from the FOMC minutes. And while job openings are historically high, in April they fell 3.8 per cent from the March record highs.

On Thursday in the US, the usual US weekly data on claims for unemployment insurance (initial jobless claims) will be issued with the ADP employment report, trade balance and job cuts series from Challenger.

Also on Thursday, St. Louis Federal Reserve President James Bullard delivers a speech on the US economy and monetary policy at the Little Rock Regional Chamber.

On Friday, the pivotal US non-farm employment report is issued. Job growth, the jobless rate, average hourly earnings and average weekly hours worked are all key as expects of the report. Analysts tip job growth of 275,000 in the June report. A 3.6 per cent jobless rate is also expected with 5.2 per cent annual wage growth – both metrics unchanged from May.

Also in the US on Friday is consumer credit data for May.

And on Saturday in China, the June data on producer and consumer prices is released with new vehicle sales and a number of money supply and lending indicators.

Producer prices are up 6.4 per cent on a year earlier, the lowest in 14 months. Consumer prices are up just 2.1 per cent, but this still equals the highest reading recorded in six months.

Originally published by Craig James, Chief Economist, CommSec