The Experts

James
Craig James - CommSec
Economy Expert
+ About Craig James
About Craig James

Craig James is CommSec’s Chief Economist.

On leaving school Craig James joined the (then) Rural Bank, whilst undertaking university studies. He received his Bachelor of Commerce (Economics) at University of NSW in 1984 and then a Master of Commerce (Economics) at the same university in 1988.

He remained at the Rural Bank, which became the State Bank over time and then Colonial, working in branches, Corporate, Planning and Economic Research.

He became chief economist of Colonial Group in September 1987, before becoming chief economist at CommSec in August 2000 with the Commonwealth takeover of Colonial.

In 2002 Craig had a sea-change, joining the Australian Financial Review. He had always wanted to pursue a role in journalism and enjoyed the role as an economic commentator and analysts, finding that he could pursue a journalistic-type role as well as doing more electronic media work at CommSec and rejoined the group in 2003.

On taking the reigns of chief economist at Colonial, Craig endeavoured to style their research in a “user-friendly” way – something that set their research apart and still does today. The approach has been successful in their media work and in promoting Colonial, and then CommSec, to the general public. CommSec is the most quoted economic group in the mainstream media.

CommSec economic reports are a bit different in that they devise tools such as the ‘Mums and Dads’ share index and the iPod index, and undertake research on the weather and demographic changes to show how they affect the economy.

Craig currently does around 2-3 regular TV crosses a day, ad hoc radio and newspaper interviews and writes regular commentaries as well as presenting to staff, clients and external organisations.

Outside work, Craig's main interests are athletics (cross country in winter), weight training, reading widely across a range of newspapers, magazines and electronic media, and trying to keep up with the children.

The week ahead: Money for nothing

Friday, July 13, 2018

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Australia: Money for nothing 

·         The mid-winter lull in economic data continues in Australia. However, the all-important June employment report is issued on Thursday. Tourism and business sales data will also be keenly observed.

·         The week kicks-off on Monday with the “Overseas Arrivals & Departures” publication from the Australian Bureau of Statistics (ABS). As well as providing data on tourist arrivals and departures, there are figures on longer-term migration flows. Tourist arrivals fell by 1.9% to 756,300 in April, down from a downwardly-revised record high of 770,800 (previously 771,600) in March. Departures rose by 1.3 per cent in April to a record high of 923,400, up from 911,200 in March. Over the past year a record 800,240 permanent and long-term migrants moved to Australia, up by 4.0 per cent. 

·         On Tuesday the minutes of the last Reserve Bank Board meeting are released. Each meeting there is a special issue or topic that is discussed. And that discussion can prove useful in gauging member views on interest rate sensitivities. For example, wages growth remains a key focus of Board members. In the July 3 policy Statement, the commentary highlighted that, “there are increasing reports of skills shortages in some areas”. Economists will be keeping an eye out for some evidence of this development through its business liaison program.

·         Also on Tuesday is the regular weekly gauge on consumer confidence from Roy Morgan and ANZ.

·         On Thursday the ABS issues the June employment report. Job-creation has slowed in recent months, with 12,000 full-time jobs added in May. The unemployment rate is at six-month lows of 5.4 per cent and the last time it was lower was 5½ years ago in January 2013. And key leading employment indicator – the Bureau of Statistics’ job vacancies – was at record high levels in May with the strongest annual growth rate in 7½ years. Economists tip an increase in total jobs of around 15,000 during the month.

·         On Friday the CBA Business Sales Indicator is released for June. Growth in economy-wide spending slowed in May, growing at the weakest trend pace for over a year. The BSI rose by 0.3 per cent in trend terms in May. And the annual trend growth in sales held at 7.7 per cent – the fastest growth for 3½ years.

Overseas: China data blockbuster 

·         Over the coming week China economic growth, investment, production, retail sales and house price data are all issued. In the US, retail spending, housing, industrial production and the US Fed’s Beige Book will be in focus. 

·         The week begins in China on Monday when the much-anticipated June quarter GDP report is released, together with the June monthly retail sales, investment and production activity data. Growth appears to have decelerated in most industries, including construction, consumption, service, manufacturing, employment and trade. 

·         Chinese production was strong in April, but weakened in May. And the June official manufacturing purchasing managers index was softer, signalling weaker growth momentum. A rebound in retail sales is tipped in June after annual spending growth was the slowest in 15 years in May. Fixed asset investment is expected to moderate further as the economy rebalances. Overall, annual GDP growth is tipped to fall by 0.1 per cent to 6.7 per cent.

·         Also on Monday, US retail spending data and the New York Fed purchasing managers’ index is released. Consumer spending surged 0.8 per cent in May and a further 0.6 per cent lift is forecast in June.  

·         On Tuesday China house prices data is scheduled to be issued. Out of the 70 cities the National Bureau of Statistics monitors, more cities saw housing prices increase in May compared with April. 

·         Also on Tuesday in the US, the National Association of Home Builders releasing the activity survey for July, industrial production and weekly data on chain store sales are issued. Sentiment among US homebuilders fell in June to equal the lowest level this year, reflecting sharply elevated lumber costs. And industrial production is tipped to rebound by 0.5 per cent in June after a contraction in manufacturing output in May.

·         On Wednesday the US Federal Reserve takes centre stage. In the most recent Beige Book – a national survey – Fed officials characterised the economy as performing well. Manufacturers raised production, banks reported stronger loan demand and home builders’ activity was robust. Trade worries will be a key focus in June’s edition. 

·         Also on Wednesday US housing starts and building permits are issued for June. In May, starts posted the biggest increase since July 2007, up 5 per cent, led by a 62 per cent surge in the US Midwest.   

·         On Thursday the weekly data on new claims for unemployment insurance is issued, together with the influential Philadelphia Federal Reserve manufacturing gauge and Conference Board's Leading Economic index. Seven of ten leading indicators increased in May, with building permits, manufacturing workweek and initial claims down.   

 

The week ahead: All eyes on China

Friday, July 06, 2018

Australia: Winter break

·         After a hectic start to the new financial year, a quieter week follows in Australia. Monthly business and consumer surveys together with housing and lending finance data feature prominently.

·         The week begins on Sunday when Reserve Bank Assistant Michele Bullock speaks at the 5th Bund Summit on Fintech in Shanghai, China.

·         In terms of economic data, the week kicks-off on Tuesday with the release of the National Australia Bank (NAB) business survey. The business conditions index fell from an upwardly-revised record high of +21.2 points (previously +21.1 points) in April to +15.1 points in May. The business confidence index fell from an upwardly-revised +10.6 points (previously +10.1 points) in April to +6.2 points in May.

·         Australia’s businesses are largely in good health and the drag from the end of the mining construction boom is receding. Jobs are being created, but employers need to lift wages to prompt an uptick in price inflation.

·         Also on Tuesday, the latest weekly reading on consumer confidence is issued by Roy Morgan and ANZ.

·         Consumer views on current economic conditions (for the next year) have been near record-high levels. Solid economic growth, robust business activity data and the passing of the Turnbull government’s personal income tax cuts legislation have lifted spirits. Jobs growth is still strong, but goods prices remain low. Interest rates won’t lift in the near-term.

·         On Wednesday, the monthly Westpac and Melbourne Institute consumer confidence reading is released. The gauge rose by 0.3 per cent to 102.1 in June. The index is above its long-term average of 101.5. A reading above 100 denotes optimism.

·         Also on Wednesday data on home loans (housing finance) are issued. The number of loans (commitments) by home owners (owner-occupiers) fell by 1.4 per cent in April – the fifth consecutive monthly decline. Loans are down by 2.9 per cent on the year. Data from the Bankers Association implies that the value of home loans may have fallen by 2 per cent in May. Developments in the housing market will continue to be closely watched by policy makers.

·         The Reserve Bank estimates on credit and debit card lending are released on Thursday. Credit card debt fell in April. The number of debit card purchases are building. The trend away from credit cards continues. Aussie companies such as Afterpay Touch continue to drive retail and payments innovation.

·         And on Friday broader lending finance are released. Total new lending commitments (housing, personal, commercial and lease finance) rose by 0.9 per cent in April to $69.6 billion. Commitments are down by 0.8 per cent on the year.

Overseas: Focus is on China data and US consumer prices

·         All eyes will be on China this week, headlined by consumer and producer prices, trade, money supply and lending data for June. US inflation data will also be keenly observed.

·         The week begins in the US on Monday when the May data on consumer credit is released. The increase in consumer credit in April was the lowest since September 2017, implying that rising interest rates may have driven consumers to pay down debt, tempering their demand for credit.

·         On Tuesday Chinese consumer and producer prices are released. Consumer prices are forecast to lift by 0.3 per cent to be 2.1 per cent over the year to June due to a rebound in food prices. Producer prices are tipped to fall to 3.8 per cent from 4.1 per cent.

·         Also on Tuesday the US JOLTS series of job openings, weekly data on chain store sales and small business sentiment gauge – the NFIB business optimism index – are released. In May, the NFIB index was at the second highest level in 45 years with businesses reporting elevated compensation, profits, and sales trends. And US job openings rose to a fresh record high in May, with vacancies exceeding the number of unemployed workers.

·         On Wednesday US producer prices are issued for June. Business prices (final demand) increased more than expected over the year to May at 3.1 per cent - the biggest annual gain in nearly 6½ years.

·         On Thursday attention returns to China. The People’s Bank of China cut the bank Reserve Requirement Ratio on June 24 and tweaked its commentary on monetary policy to "appropriately ample", signalling a looser policy stance. Loan growth may increase by 0.1 per cent to 12.7 per cent over the year to June. Broader credit growth is likely to continue to decelerate as the Chinese economy de-leverages.

·         Also on Thursday the US Treasury releases the monthly budget deficit. The US posted a US$146.8 billion budget deficit in May, the largest for the month since 2009, as revenue declined. The regular weekly data on new claims for unemployment insurance is also issued on Thursday.

·         On Friday the June data on exports and imports is released in China. A trade surplus of US$24.92 billion was recorded in May, down from US$28.78 billion a month earlier. However, much of the interest in the data will be on the latest estimates of China-US trade given ongoing tariff tensions.

·         Also on Friday, US export and import prices and consumer confidence are issued. In May, import prices recorded their largest annual advance since February 2017 at 4.3 per cent. US consumer sentiment remains elevated, but has declined since March, driven by rising tariff concerns. Favourable views on jobs and wages continue to be a support for households.

 

The week ahead: New beginnings

Friday, June 29, 2018

Australia

  • The first week is usually the busiest period of each month. And it is no different for July – the start of the new financial year in Australia.
  • The week kicks-off on Monday with CoreLogic releasing the June data on home prices. Based on daily data released so far in June, home prices have fallen 0.2% in the five mainland capital cities to stand 1.6% lower than a year ago. The national index may be end up a bit firmer due to higher home prices in regional areas and Hobart.
  • Also on Monday, ANZ issues the data on job ads for June and both AiGroup and Commonwealth Bank release survey results on manufacturing activity.
  • Job ads rebounded in May by 1.5% after three straight months of very modest declines. Meanwhile surveys show that manufacturing activity remains healthy at present, helped by a lower Aussie dollar. The AiGroup measure stands at 57.5 where any reading above 50 indicates an expansion of activity.
  • On Tuesday the Reserve Bank Board meets but no change in rate settings is expected – the 23rd month of unchanged rates.
  • In terms of economic data on Tuesday, the latest weekly reading on consumer confidence is issued by Roy Morgan and ANZ. And the Australian Bureau of Statistics (ABS) releases the data on building approvals for May. This data refers to council approvals to build new homes. Monthly results can be volatile due to ‘lumpiness’ of apartment approvals.
  • On Wednesday, there is a raft of indicators or surveys to be released. Both AiGroup and Commonwealth Bank release results of the surveys of purchasing managers in the services sector. The Federation Chamber of Automotive Industries releases the June sales data for new vehicles. And the ABS issues May data on retail trade and international trade (exports and imports).
  • Retail sales posted a healthy gain of 0.4% in April but higher petrol prices and early mid-year sales would have had had contradictory effects on the May results. New vehicle sales over April and May were softer than a year ago but budding buyers may have just been awaiting the mid-year sales.
  • On Thursday Alexandra Heath, the Head of Economic Analysis at the Reserve Bank, delivers a speech to the Urban Development Institute of Australia in Wollongong.
  • On Friday AiGroup releases the purchasing manager survey results on the construction sector.

Overseas: investors await US jobs data

  • Over the coming week the June data on non-farm payrolls (employment) in the US will be released together with survey results detailing activity in the manufacturing and services sectors.
  • The week begins in China on Sunday when Caixin will release the results of a survey of purchasing managers active in the manufacturing sector. The equivalent gauge of the services sector is issued by Caixin on Tuesday.
  • In the US, the week begins on Monday when the Institute of Supply Management (ISM) releases the monthly survey of purchasing managers in the manufacturing sector. On the same day, May data on construction spending is issued. Economists tip the ISM gauge to ease from 58.7 to 58.4 in June where any reading above 50 indicates expansion of the manufacturing sector.
  • On Tuesday, US data on new auto sales is issued with the regular weekly data on chain store sales and monthly figures on factory orders.
  • US markets are closed for the Independence Day holiday on Wednesday.
  • On Thursday a backlog of data releases are scheduled. ISM releases the June results of the survey of purchasing managers active in the services sector. Challenger releases data on job cuts announced by US-based employers during June. Job cuts announced in May were the lowest in seven months. The ADP survey of private sector payrolls is also issued with analysts tipping a 175,000 lift in private jobs in June.
  • Also on Thursday the May international trade data (exports and imports) is issued together with minutes of the last Federal Reserve meeting as well as the regular weekly data on new claims for unemployment insurance.
  • On Friday arguably the most influential of the week’s data releases is issued – the non-farm payrolls or monthly employment report. In May, 223,000 jobs were created and economists expect that another 188,000 jobs were created in June.
  • However job creation is only part of the story. Investors will be watching to see if the jobless rate fell further from the 18-year low of 3.8%. And wages (hourly earnings) are also of interest to investors. Average hourly earnings rose by 0.3% in May to stand 2.7% higher than a year ago.

 

The week ahead: End of Financial Year lull?

Friday, June 22, 2018

Australia: End of Financial Year lull

  • The End of Financial Year (EOFY) may be approaching, but tier-1 economic data in Australia is scarce this week. The latest update on Aussie household finances will be keenly observed given the laser-like focus of the Reserve Bank and economists on the biggest driver of economic growth – household consumption.  
  • The week kicks-off on Tuesday with the latest weekly reading on consumer confidence by Roy Morgan and ANZ. The number of optimists currently outweigh the number of pessimists. Improving job security, potential personal income tax cuts and EOFY sales have boosted consumer sentiment. That said, rising petrol prices, the weaker Aussie dollar, anaemic wage growth and falling home prices have weighed on household views.   
  • Also on Tuesday, the Reserve Bank Head of Payments Policy, Tony Richards, speaks at the Australian Business Economists (ABE) event on cryptocurrencies.
  • On Wednesday, the ABS releases the March quarter publication Engineering Construction Activity. While the ‘top level’ results have already been published, the publication goes into more detail about where the work is being done and how much activity is still to be completed.
  • On Thursday, the ABS releases the Finance & Wealth publication. The publication contains a raft of indicators such as household debt and wealth and sectoral holdings of financial assets such as foreign ownership of shares and bonds.
  • Total household wealth (net worth) stood at a record $10,192.3 billion at the end of December, up $191.7 billion or 1.9 per cent over the quarter. In per capita terms, we estimated that wealth rose to a record $411,229 in the December quarter. And foreigners held a record $581.4 billion of Aussie shares in the December quarter or 30.4 per cent of the total.
  • On Thursday, the Bureau of Statistics releases the latest data on job vacancies – a key leading indicator of the job market. Job vacancies rose by 4.3 per cent to a record 220,900 in the three months to February. Job vacancies are up 19.3 per cent on a year ago – the strongest annual growth rate in over seven years. Compositionally, jobs growth has been led by the health services, education and construction-related industries. Near-record female participation in the workforce is lifting part-time jobs growth.   
  • The Reserve Bank also issues the May Financial Aggregates publication on Friday. Most interest is in the estimate of private sector credit (effectively loans outstanding) but measures of money supply are also released. Private sector credit (effectively outstanding loans) rose by 0.4 per cent in April after a 0.5 per cent rise in March. Credit was up 5.1 per cent over the year. Bank deposits rose just 2.5 per cent over the year to April.
  • Also on Friday, new home sales data for May is scheduled to be released by the Housing Industry Association.

Overseas: US economic growth and China manufacturing activity data dominate

  • Over the coming week, US economic growth, the US Federal Reserve’s preferred inflation measure, the core personal consumption expenditure deflator, and Chinese profits and manufacturing data are all released.
  • The week begins in the US with the release of two influential regional activity gauges from the Federal Reserve Banks of Chicago and Dallas on Monday and Tuesday.
  • Also on Tuesday, housing data comes into focus. New home sales are forecast to lift by 0.6 per cent in May to around 666,000 units. And a 0.2 per cent gain in home prices is projected in April, bringing the annual growth rate for the S&P/Case-Shiller 20-city gauge to 6.5 per cent. US home prices grew at the fastest quarterly rate since 2006 in March. The regular weekly data on chain store sales rounds-out the data.
  • On Wednesday, Chinese industrial profits data are issued for May. Profit growth rebounded strongly by 21.9 per cent over the year to April on the back of a favourable base effect and strong sequential growth. Unwinding of the Chinese New Year holiday effect contributed to the acceleration of revenue growth and industrial profit growth.
  • Also on Wednesday, there’s a data deluge in the US. The Richmond Fed Manufacturing Index, Conference Board consumer confidence, trade, durable goods orders and the regular weekly data on mortgage finance are all issued. US consumers' assessment of current economic conditions is at a 17-year high. An overall US trade deficit of US$67.3 billion is expected in May, up from US$68.2 billion in April. And a key measure of business investment, durable goods orders, is tipped to lift by 0.2 per cent in May after a 1.6 per cent fall in April.
  • On Thursday, the final estimate of US economic growth (GDP) for the March quarter is released. No change in the annualised growth rate at 2.2 per cent is expected. Annual retail sales growth has picked-up to 5.9 per cent over the year to May, implying that the ‘soft patch’ in household consumption in early 2018 is behind us.  
  • Also on Thursday, in the US is the regular weekly data on new claims for unemployment insurance.
  • On Friday, influential regional gauges from the Federal Reserve Banks of Chicago and Kansas are released. The personal income and spending report is also issued. The Fed’s preferred measure of inflation – the personal consumption expenditure deflator – will be keenly observed. The deflator is expected to increase by 0.2 per cent to an annual growth rate of 2.1 per cent in May.
  • On Saturday, China’s manufacturing and services purchasing managers’ indexes are released. Manufacturing activity rose in May to the highest level since September 2017. Solid growth momentum, unseasonally hot weather, and rising upstream commodity prices may have contributed to the increase.

 

The week ahead: Australian arrivals and departures

Friday, June 15, 2018

Australia: Jobs, business and consumer surveys dominate

  • It’s probably fair to say that there are no ‘top shelf’ economic indicators for release in either Australia or the US in the coming week. But as always the indicators round out our knowledge of how the economies are performing.
  • The week kicks-off on Monday with the “Overseas Arrivals & Departures” publication from the Australian Bureau of Statistics (ABS). As well as providing data on tourist arrivals and departures, there are figures on longer-term migration flows.
  • Tourist arrivals rose by 2.6 per cent to a record high of 771,600 in March. Departures rose by 4.1 per cent in March to a record high of 908,100. Arrivals are up 9.0 per cent on the year with departures up by 6 per cent.
  • On Tuesday the minutes of the last Reserve Bank Board meeting are released. Each meeting there is a special issue or topic that is discussed. And that discussion can prove useful in gauging member views on interest rate sensitivities.
  • In terms of economic data, on Tuesday the ABS releases its publication “Residential Property Price Indexes”. The data is relatively “old”, up to just the March quarter. But apart from prices there is other data covering the average value of homes and changes in the number of homes in each state.
  • Also on Tuesday is the regular weekly gauge on consumer confidence from Roy Morgan and ANZ.
  • On Wednesday the Reserve Bank Governor, Philip Lowe, participates in a panel discussion at the at the Forum on Central Banking, hosted by the European Central Bank in Portugal.
  • In terms of economic data, data on skilled vacancies is released on Wednesday with the CBA Business Sales Indicator.
  • On Thursday the ABS issues the population data for the December quarter as well as detailed figures on the labour market. Australia’s population expanded by 395,613 people over the year to September 2017 to 24,702,851 people. Overall, Australia’s annual population growth rate rose marginally from a downwardly-revised 1.60 per cent (previous 1.61 per cent) to 1.63 per cent – still the fastest population growth in around 3½ years.
  • And the detailed job data will include information on employment by industry. The job market is coming off a record year in 2017 and employment growth is still well above average as is the growth in the number of people entering the job market.
  • Also on Thursday the Reserve Bank releases the quarterly Bulletin.

Overseas: US housing data dominates

  • In the US over the coming week there will be a raft of indicators on the housing market including starts, home prices and sales of existing homes.
  • The week kicks off on Monday in the US with the National Association of Home Builders releasing the activity survey for June.
  • On Tuesday, data on new construction – the number of homes where work began in May – is released. Over the last seven months, starts have been bouncing around at an annualised pace of 1.20-1.35 million. Starts stood at a four-month low in April of a 1.287 million annual rate.
  • Also on Tuesday the regular weekly data on chain store sales is released.
  • On Wednesday, data on the current account deficit will be released with existing home sales. There is around four months worth of supply of homes on the market. Sales have tracked sideways over the past year.
  • Also on Wednesday the regular weekly data on mortgage finance is issued.
  • On Thursday the US leading index is released with monthly data on home prices and the influential Philadelphia Federal Reserve survey.
  • The US leading index is designed to show where the economy is headed, and on the basis of the 0.4 per cent increase in April, the economy has solid momentum.
  • Also on Thursday in the US is the regular weekly data on new claims for unemployment insurance.
  • On Friday the Markit “flash” or preliminary readings on activity in the services and manufacturing sectors are issued. And the survey results aren’t just issued in the US, but also France, Germany, Eurozone and Japan.

Financial markets

  • Well, the first six months of 2018 is almost completed. So it is an opportune time to see how global sharemarkets and currencies have performed.
  • CommSec has tracked the cross rate of 120 currencies against the US dollar over the year and only 18 have appreciated since the start of the year. And gains have averaged just 1.4 per cent. Around 20 currencies are unchanged against the greenback while the remainder have weakened, averaging losses of 3.3 per cent.
  • The Colombian peso is strongest, up 4.2 per cent, followed by the Japanese yen. The weakest is the Venezuelan bolivar, falling from 9.975 bolivar per US dollar to 79,800 bolivar/USD. The Australian dollar is 90th, down 2.7 per cent.
  • Across 73 sharemarkets, 37 have risen over 2018 while 36 have fallen. The Ukraine market is strongest, up 40 per cent while Turkey is down 17 per cent. The Australian sharemarket is in 41st spot, down 0.6 per cent this year.

 

The week ahead: The US Fed takes centre stage

Friday, June 08, 2018

Australia: Jobs, business and consumer surveys dominate

  • Following the Queen’s Birthday public holiday on Monday, ‘tier 1’ economic data releases feature prominently in the coming week. The all-important May employment report is issued on Thursday. Monthly business and consumer surveys together with housing and lending finance data cap-off a busy, but holiday-shortened week. 
  • The week kicks-off on Tuesday with the release of the National Australia Bank business survey. The NAB business conditions index rose to a record high of +21.1 points in April, up from an upwardly-revised +15.4 points in March (previously +14.1 points). The business confidence index rose to +10.1 points in April from an upwardly-revised +8.0 points in March (previously +7.4 points).
  • There are good reasons to expect that business conditions and confidence remained robust in May. Investors will also look for any signs of nascent wage or price pressures given the fairly benign inflation outlook.
  • Also on Tuesday data on home loans (housing finance) and broader lending finance are issued with credit and debit card lending. Demand for loans, especially from investors, has weakened in line with softening home prices and tighter bank lending standards. Data from the Bankers Association implies that the value of home loans may have fallen by 5 per cent in April.
  • On Wednesday the Reserve Bank Governor delivers a speech “Productivity, Wages and Prosperity”. Investors will be looking for any new views on the economy that could influence the timing of the next interest rate change.
  • The weekly consumer sentiment index is scheduled to be released by Roy Morgan and ANZ on Wednesday.
  • Also on Wednesday, the monthly Westpac and Melbourne Institute consumer confidence reading is released. The gauge fell by 0.6 per cent to 101.8 points in May. Still, the index remained above its long-term average of 101.5 points. A reading above 100 points denotes optimism. Most interest is on the quarterly survey of ‘wisest place for savings’.
  • On Thursday the ABS issues the May employment report. The record-breaking job-creation machine has slowed in recent months. However, a still-healthy 32,700 full-time jobs were added in April. A key leading indicator – the ANZ job advertisements series – was at the highest level in seven years in May. And the number of hours worked rose by 1.1 per cent in April and were up by 5.4 per cent over the year – the strongest annual gain in 18 years – highlighting the underlying strength of the job market.
  • The unemployment rate remains ‘sticky’ at 5.6 per cent due to an increase in the participation rate – now at 65.6 per cent. More females and older Aussies are working or looking for work than ever before. Economists tip an increase in total jobs of around 20,000 during the month.
  • On Friday, Reserve Bank Assistant Governor Luci Ellis delivers a speech.

Overseas: The US Federal Reserve takes centre stage

  • All eyes will be on the US Federal Reserve monetary policy meeting commencing on Tuesday. US inflation data will also be keenly observed. Monthly sales, production and investment data feature in China.
  • The week kicks off on Monday in China with money supply and lending data expected.
  • On Tuesday, the US Federal Reserve begins its two day monetary policy meeting. With core inflation breaching the US Federal Reserve’s 2 per cent target and the unemployment rate at an 18-year low of 3.8 per cent, the Federal Reserve Funds Rate is expected to be increased by 0.25 per cent to 1.75-2.00 per cent target range.
  • Also on Tuesday US consumer prices, the monthly budget statement, weekly data on chain store sales and a measure of small business sentiment – the NFIB business optimism index – are all released. Core inflation is tipped to increase by 0.2 per cent to 2.2 per cent. Headline consumer prices are forecast to lift by 0.2 per cent to 2.6 per cent due to rising gasoline, shelter and food prices.
  • On Wednesday in the US, data on producer prices and the weekly mortgage lending figures are expected. The core measure of producer prices (excludes food and energy) stands at a 2.6 per cent annual rate. A 0.2 per cent increase in prices is tipped in May.
  • On Thursday Chinese investment, production and retail sales are issued for May. The official manufacturing purchasing managers’ index rose to its highest level in nine months in May due to unseasonably warm weather and rising upstream commodity prices. Investment and production are tipped to maintain stable annual growth rates of 7 per cent. Retail sales may be up 9.5 per cent over the year.
  • Also on Thursday US retail sales, trade (export/import) prices and inventories data are released. A 0.4 per cent lift is tipped in May after a winter ‘soft patch’ in the March quarter. 
  • On Friday China house prices are issued for May. Prices in Tier 1 cities are decelerating as the government clamps down on property speculation.
  • Also on Friday US industrial production, consumer confidence and the New York Fed purchasing managers’ index are issued.

 

 

The week ahead: Winter is here

Friday, June 01, 2018

 

Australia: "Winter Whirlwind"

  • Each change in season is accompanied by a marked increase in the amount of new Australian economic data. So the “Winter Whirlwind” gets underway in the coming week. Well over a dozen indicators will be released in the first two weeks of June, with economic growth and the Reserve Bank Board meeting in focus in the coming week.
  • The week kicks-off on Monday when ANZ releases the May data on job advertisements and the Bureau of Statistics (ABS) releases the quarterly Business Indicators publication and retail trade data.
  • Job ads fell by 0.2 per cent in April after falling 0.1 per cent in March. Hiring has slowed after the frenetic pace of 2017.
  • The ABS business indicators publication includes data on sales, profits, wages and inventories so the data is important in rounding out our knowledge of the economy.
  • Retail trade may have lifted a modest 0.2 per cent in April.
  • On ‘Super Tuesday’ there are five economic indicators to be released alongside the meeting of the Reserve Bank Board.
  • Car sales, consumer sentiment, the services gauge, government finance and the quarterly balance of payments are due for release.
  • Arguably the most important of the indicators are the car sales figures, services gauge and the weekly reading on consumer sentiment because they are the timeliest. Consumer confidence has generally improved in recent weeks. The key question is whether the lift in confidence has translated to increased spending.
  • The Reserve Bank Board also meets on Tuesday, but no change in rates is expected. This will be the 22nd consecutive month without a change in rates. In fact, it is difficult to expect any change in the wording of the accompanying statement.
  • On Wednesday, the ABS releases the March quarter estimate of economic growth – as judged by the change in gross domestic product (GDP). There are a number of components of the GDP equation still to be revealed, but on current information it seems like the economy grew by 0.5-0.7 per cent in the quarter. The Reserve Bank is expecting annualised economic growth to lift to around 3.25 per cent over the coming year, up from the current annual rate of 2.4 per cent.
  • On Thursday the ABS releases the April data on exports and imports. The March trade surplus hit a 10-month high of $1,527 million. And there has only been one trade deficit recorded in the past 11 months. So it is clear that Australia is paying its way in the world, courtesy of both higher prices and volumes of mining and rural goods as well as higher tourism receipts. A surplus of around $1 billion is tipped in April.
  • Also on Thursday AiGroup releases its construction industry gauge for May.

Overseas: Quiet week in the US

  • A quieter week is in prospect for economic events in the US. But trade and inflation figures will be released in China, adding to the list of economic offerings.
  • The week kicks off on Monday in US with data on factory orders as well as the US ISM New York regional gauge. Factory orders have lifted in seven of the past eight months, rising by 1.6 per cent in March. And the ISM index hit a 3-month high in April.
  • On Tuesday, gauges that track activity in the services sector are to be released in both China and the US. Also in the US the JOLTS series of job openings will be issued together with the IBD/TIPP economic optimism index and the usual weekly data on chain store sales.
  • On Wednesday the international trade data for April is released in the US together with the final March quarter estimates of productivity and labour costs. In March the trade deficit was US$49 billion, little-changed from February. And economists don’t see too much scope for change in the 2.7 per cent annual lift in labour costs or 0.7 per cent annualised lift in productivity.
  • The usual weekly data on mortgage lending is also issued in the US on Wednesday.
  • In the US on Thursday the April data on consumer credit is released with the regular weekly data on new claims for unemployment insurance (jobless claims). Jobless claims have lifted over the past four weeks from the lowest levels in 48 years. And consumer credit lifted US$11.6 billion in March – the smallest increase in six months.
  • On Friday the May data on exports and imports is released in China. In April a trade surplus of US$28.8 billion was revealed with exports up 12.9 per cent on a year earlier and imports up 21.5 per cent. However much of the interest in the data will be on the latest estimates of China-US trade.
  • On Saturday in China the May inflation data is due for release – data on both producer and consumer prices. In April, consumer prices fell 0.2 per cent, causing annual growth to slow from 1.9 per cent to 1.8 per cent. The annual rate of producer prices lifted from 3.0 per cent to 3.4 per cent in April.
  • Also on Friday and Saturday, leaders of the G7 or Group of Seven nations meet in Canada.

 

The week ahead: Heavyweight US economic growth

Friday, May 25, 2018

 

Australia: Business investment and home prices in focus

  • A relatively quiet week beckons in terms of new economic data. Home prices, building approvals and business investment are the indicators of most interest.
  • The week kicks-off on Tuesday when Roy Morgan and ANZ release the weekly consumer sentiment results.
  • On Wednesday, local council building approvals data for April is issued. Approvals to build new homes rose by 2.6 per cent in March. Strong population growth is lifting demand for housing in Victoria. The value of building approvals hit a record high of $126.4 billion over the year. Annual commercial building approvals stand at a record high of $48 billion.
  • On Thursday the Australian Bureau of Statistics (ABS) releases the Private Capital Expenditure publication (essentially business investment figures). New investment grew by four per cent over the year – the fastest annual growth rate in five years.
  • In the December quarter the future spending plans were also positive. The upgrade in investment plans from the fourth to the fifth reading for the current financial year was the strongest for an equivalent period going back eight years. The other good news is that there is a broad-based lift in actual annual investment spending across the non-mining-focused states and territories.
  • Also on Thursday the Reserve Bank releases the monthly Financial Aggregates publication that includes the private sector credit measure (effectively ‘loans outstanding’). While most attention has been on housing credit growth, business credit posted a welcome increase of 0.8 per cent in March after three consecutive weak prints. Could this be the much-awaited inflection point following a period of strengthening non-mining business investment?
  • On Friday CoreLogic releases home price data for May. And based on the weekly observations (to May 20), home prices in all the five mainland state capitals were either flat or slightly lower during the month. So far in May, Melbourne and Sydney home prices are down by 0.4 per cent and 0.2 per cent, respectively. Sydney home prices are down by 3.9 per cent, the weakest annual outcome in over five years.
  • Also on Friday the Housing Industry Association is scheduled to release its new home sales report for April. And both AiGroup and Commonwealth Bank release surveys of manufacturing purchasing managers.  

Overseas: Heavyweight US economic growth, personal spending and employment data

  • Following the Memorial Day public holiday on Monday, the US enters the Northern Hemisphere summer with a tier-1 data deluge. Economic growth, employment and the US Federal Reserve’s preferred measure of inflation, are all released. Chinese manufacturing and services purchasing manager gauges are also issued. 
  • The week kicks off on Tuesday in the US when the CaseShiller home price and Conference Board consumer confidence surveys are released. Home prices grew at a healthy annual rate of 6.8 per cent in February. And consumer confidence index is hovering near 17-year highs due to improving job security. The Dallas Fed manufacturing index and regular weekly data on US chain store sales round-out the data releases.
  • On Wednesday the second (preliminary) estimate of US economic growth for the March quarter is issued. The initial estimate suggested that the economy grew at a 2.3 per cent annual rate. And only a modest upgrade in growth to 2.4 per cent is tipped as consumer spending softened over the winter months.
  • Also on Wednesday the advance report on goods trade is issued for April. The US trade deficit in goods narrowed by 10.3 per cent to US$68.3 billion in March - the first narrowing of the deficit in seven months as imports weakened. The private sector ADP employment report, US Federal Reserve Beige Book of regional economic conditions and mortgage finance data are also released.
  • China’s National Bureau of Statistics issues the purchasing managers’ surveys for May on Thursday. Manufacturing and services activity have been stable. According to the State Information Centre, China’s economy is likely to grow at an annualised rate of 6.7 per cent over the June quarter.
  • In the US on Thursday the personal income and spending report is released. The US Federal Reserve’s preferred measure of inflation – the personal consumption expenditure deflator – will be keenly observed. The deflator is expected to increase by 0.1 per cent to an annual growth rate of 2 per cent in April.
  • Also on Thursday data on new claims for unemployment insurance, pending home sales and the regional manufacturing survey from the Chicago Federal Reserve are all issued.
  • On Friday the Chinese private sector Caixin purchasing manager’s index for manufacturing is released.
  • Also on Friday the US jobs and ISM manufacturing reports for May are issued. The unemployment rate is forecast to remain stable at a 17½-year low of 3.9 per cent while an additional 185,000 jobs may have been created in the month.
  • The prices gauge of ISM index hit 7-year highs in April, stoking inflationary concerns as manufacturers passed on input price increases. And construction spending is tipped to rebound by 1.1 per cent in April following a 1.7 per cent decline in March.

 

The week ahead: Consumer confidence and US housing

Friday, May 18, 2018

Australia: Quiet times

  • In Australia over the coming week, the economic diary is sparsely populated. Main interest will be in a speech from the Reserve Bank Governor on Wednesday.
  • The week kicks off on Tuesday with the weekly gauge of consumer confidence to be issued by ANZ and Roy Morgan. Consumers have been more upbeat in recent weeks with sentiment underpinned by a relatively stable global environment, higher share prices and positive economic data. The main negatives have been a softer currency and higher petrol prices.
  • On Wednesday the Reserve Bank Governor, Philip Lowe, delivers a speech at 6pm in Sydney at the Australia-China Relations Institute.
  • Also on Wednesday the Australian Bureau of Statistics (ABS) releases the publication “Construction work done”. Data is provided on work done by residential and commercial sectors in both nominal and real (inflation-adjusted) terms.
  • The data on residential building is an input to the calculation of economic growth for the March quarter. The economic growth data will be released on June 6.
  • On Thursday the Reserve Bank Assistant Governor covering the financial system, will be delivering a speech at the at the De Nederlandsche Bank Housing Market seminar in Amsterdam.
  • Also on Thursday the ABS releases more detailed estimates on the job market for April. Main interest will be data covering regional areas as well as demographic groupings.
  • And on Friday, the ABS releases the publication “Australian Industry 2016/17”. The data includes estimates on employment, sales, expenses, wages and profits with the estimates going back a decade.

Overseas: US housing in focus

  • In the coming week there are a number of indicators covering the US housing market. The other point of interest is the minutes of the last Federal Reserve meeting.
  • The week kicks off on Monday when the Chicago Federal Reserve releases its national activity index. In March the index eased from a solid reading of +0.98 to +0.10. But averaging out the last three months gives a more accurate measure of +0.27, suggesting the economy remains in good shape.
  • The regular weekly data on US chain store sales will also be issued on Tuesday while mortgage finance data is on Wednesday and new claims for unemployment insurance on Thursday.
  • On Wednesday in the US, the Federal Reserve releases minutes of the last meeting. Data on new home sales is also released while the Markit organisation releases its “flash” or early results on activity in the manufacturing and services sectors. The Markit results cover not just the US but also Germany, France, the Eurozone and Japan.
  • Investors will dissect the Fed minutes carefully but it will take something exceptional to dissuade investors from the view that the Fed will lift rates in June.
  • New home sales rose by 4 per cent to a seasonally adjusted annual rate of 694,000 in March – a 4-month high. Sales out-paced expectations in March so some retracement is possible in April.
  • On Thursday in the US data on existing home sales for April will be released with home prices for March. Existing home sales rose by 1.1 per cent to a 5.6 million annual rate in March. Economists expect that sales may have flattened at a 5.6 million annual rate in April.
  • Home prices rose 0.6 per cent in February to stand 7.2 per cent higher than a year ago. Prices may have risen by another solid 0.6 per cent in March.
  • On Friday a key measure of business investment – durable goods orders – will be released for April. Economists expect some easing in spending with orders down 1.4 per cent after a 2.6 per cent lift in March. The final May reading on consumer sentiment for May is also issued on Friday.

Financial markets

  • Despite a modest uptick over February and March, volatility has remained low on the Australian sharemarket over the past year. In both February and March there were three days where the ASX 200 index rose or fell by more than 1 per cent. In the combined six months prior, there were three days where the ASX 200 rose or fell by more than 1 per cent. So there was a lift in volatility, but it needs to be kept in context. Over the past decade, the ASX 200 has risen or fallen by 1 per cent a day on average by just over five times a month.
  • Over the past year, there were 22 days where the ASX 200 rose or fell by more than 1 per cent. Apart from the year to January 2018 (21 days), that was the least volatile period for the sharemarket in 12 years.
  • The important point is that the ASX 200 share index has tended to lift as volatility recedes. The inverse relationship between volatility of the ASX 200 index and the index itself is clear between 2011-2013 as well as 2015-2017.
  • Since daily volatility peaked in February 2016, the ASX 200 index has lifted by 25 per cent.

 

The week ahead: Wage Price Index and China's activity

Friday, May 11, 2018

 

Australia: Wages growth and jobs report in focus
  •  In Australia over the coming week, the main focus will be on the latest quarterly Wage Price Index (WPI). Wage growth is crucial for the inflation and interest rate outlook. All eyes will also be on the employment report on Thursday.  
  • The week kicks off on Monday when the Reserve Bank issues statistics on credit and debit card lending and ATM transactions for March. The average credit card balance rose by $94.10 to $3,180.70 in February – the largest increase in 2½ years.
  • On Tuesday the Bureau of Statistics (ABS) releases lending finance data. Total new lending commitments (housing, personal, commercial and lease finance) fell by 1 per cent in February to $70.7 billion. Commitments are up by 4.7 per cent on a year ago.
  • Also on Tuesday the weekly gauge of consumer confidence is issued by ANZ and Roy Morgan.
  • The Reserve Bank also releases minutes of its May Board meeting on Tuesday. However, the commentary is unlikely to provide fresh perspectives following the release of the quarterly Statement on Monetary Policy last Friday. Also, Reserve Bank Deputy Governor Guy Debelle speaks at the CFO Forum in Sydney and ISDA Forum in Hong Kong (video link).
  • Rounding-out the data deluge on Tuesday, the ABS releases the “Overseas Arrivals and Departures” publication. The publication includes data on tourist flows as well longer-term migration data. A record number of Chinese, American and Indian tourists visited Australia in February. 
  • On Wednesday the much anticipated data for the wage price index for the March quarter is issued. The latest data on enterprise bargaining agreements showed average annualised wage increases lifting from 2.2 per cent to 2.5 per cent. Skills shortages are becoming more evident in high demand sectors as the labour market tightens. The wage price index is tipped to increase by 0.6 per cent to be up 2.2 per cent over the year to March.
  • Also on Wednesday, the monthly Westpac and Melbourne Institute consumer confidence reading is released. In April confidence fell by 0.6 per cent as share market volatility and trade war rhetoric weighed on household sentiment. But the index remained above 100, indicating that there are still more optimists than pessimists.
  • On Thursday the ABS issues the April employment report. The record-breaking job-creation machine has slowed in recent months. The net employment gain of just 4,900 in March reflected a softening in leading indicators such as the ANZ job advertisements index. The unemployment rate remains ‘sticky’ at 5.5 per cent due to an increase in the participation rate. More females and older workers are working or looking for work than ever before. Economists tip an increase in total jobs of around 20,000 during the month.
  • On Friday the CommBank Business Sales Indicator (BSI), a measure of economy-wide spending, is released for April. The annual trend growth in sales lifted to 7.2 per cent in March – the fastest growth for almost 3½ years.

 

 

 

Overseas: China monthly activity data dominates 

  • The monthly report cards on Chinese investment, production, retail sales and house prices will be issued over the week. In the US, a number of ‘top shelf’ indicators will also be released such as sales and production.
  • The week kicks off in China on Tuesday with April data on investment, production and retail sales to be issued. Manufacturing purchasing managers’ indexes were broadly stable in April, implying that investment and production recorded respective annual gains of 7.5 per cent and 6 per cent over the year to April. And with consumer confidence near 20-year highs, annual growth of retail sales is tipped to remain near 10 per cent.
  • The regular weekly data on US chain store sales will also be issued on Tuesday while mortgage finance data is on Wednesday and new claims for unemployment insurance on Thursday.
  • In the US, the National Association of Home Builders (NAHB) index, business inventories, the New York State Empire manufacturing survey and retail sales data are all released on Tuesday. Retail sales rose 0.6 per cent in March, halting a streak of three consecutive monthly declines in sales. Consumers continue to show some restraint in discretionary spending. However, a lift of 0.4 per cent in retail spending is forecast.
  • On Wednesday the National Bureau of Statistics issues China’s 70-city housing price data for April. House price growth decelerated to 4.9 per cent in March, continuing the decline from a peak of 12.6 per cent in November 2016. Policymakers have announced stricter property-buying controls in an effort to cool prices. A further decline in the annual growth rate to 4.5 per cent is tipped by economists.
  • Also on Wednesday US housing data is released. Housing starts rose by 1.9 per cent in March with building permits up by 4.4 per cent. The gains in the month were driven almost entirely by multi-unit dwellings.
  • On Thursday economists expect that US industrial production rose a further 0.6 per cent in April. Manufacturing, utilities and mining are all contributing to the upturn in output. Capacity utilisation was at 78 per cent in March. 
  • Also on Thursday the influential Philadelphia Federal Reserve manufacturing gauge is released for May. There was a notable pick-up in the underlying prices paid index in April, signalling a lift in business inflationary pressures.  
  • The Conference Board's leading economic index for April is also scheduled for release on Thursday.

 

 

 

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