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.

Investor signposts: Spotlight on Aussie wages

Friday, August 11, 2017

By Craig James

In Australia over the coming week, wage data will be in focus. Overseas in the US, the main interest will be in the minutes of the last Federal Reserve Open Market Committee meeting. While in China the usual monthly download of Chinese economic data – including retail sales, production and investment are slated for release on Monday.

In Australia the week kicks off on Monday when the Reserve Bank releases the latest data on credit and debit card lending. In May, the average credit card balance in smoothed terms was down 0.7 per cent on a year. Consumers are still winding back credit and are reluctant to take on additional debt.

On Tuesday, not only will the minutes of the last Reserve Bank Board meeting be released but data on car sales and consumer confidence will be issued and dissected by investors and analysts.

The Reserve Bank has already released the quarterly Statement on Monetary Policy. So the main interest in the Board minutes will be any insights from the Reserve Bank on the high Australian dollar as well as “liaison” with businesses or retailers. 

The Australian Bureau of Statistics (ABS) provides seasonally adjusted and trend estimates on auto sales. The industry data has already revealed that sales were at record highs for a July month. Annual sales of SUVs and “other vehicles”, like utes, are also holding at record highs.

On Wednesday, the main measure of wages is released by the ABS – the wage price index. While many remark at the ‘extraordinary’ situation of super low wage growth, it is still the fact that wage growth outpaces some of the key inflation measures. We tip wage growth of 0.5 per cent in the quarter and 1.9 per cent growth over the year. The strength in employment growth and sliding unemployment is unlikely to lift wage growth in the near-term.

On Thursday there are two pieces of economic data. Most focus will be on the July jobs report. But the estimates of average weekly earnings are also issued.

First to the jobs data. Over the past two months almost 100,000 jobs have been created. In addition, unemployment is falling and hours worked are up 1.3 per cent over the year – the best annual growth in 11 months. The forward indicators like job ads and business surveys continue to point to a stronger job market. For the record we expect that jobs may have lifted by 20,000 in July and the jobless rate may have eased from 5.6 per cent to 5.5 per cent..

The average weekly earnings data is released every six months. However the figures are important in that they provide dollar estimates of wages in the economy across states and industries.

Spotlight on US and Chinese data; FOMC minutes

In the coming week in the US, various ‘top shelf’ indicators are expected like retail sales. But most analysts and investors will spend time dissecting the minutes from the last Federal Reserve meeting.

The week kicks off in China on Monday, with the release of July data on retail sales, industrial production and investment – potentially market-moving for the Aussie dollar and commodity prices. Annual Chinese economic growth has been slowing, but that is ‘normal’ for a maturing economy. More importantly, annual retail sales is now holding at an 18-month high. Also lending and money supply data is between Saturday and Wednesday.

In the US on Tuesday, there are five ‘top shelf’ indicators – import price index, empire manufacturing, retail sales, the NAHB housing market index and business inventories are released. Most interest will focus on the retail sales result, which is expected to show a lift of 0.4 per cent in July after the 0.2 per cent fall in June.

On Wednesday, June readings on bond buying and longer-term capital flows will be released alongside more data on the housing sector – building permits and housing starts. Building permits are expected to ease by 2.4 per cent in July, while housing starts are forecast to lift by 0.7 per cent, following the 8.3 per cent lift in July. Overall the housing sector remains healthy although the inventory of homes for sale remains below longer-term averages.

Also on Wednesday, the minutes (details) of the July 25/26 Federal Reserve meeting are issued. It is widely expected that the Fed will leave interest rate settings unchanged until December at the earliest. However the focus of the minutes is likely to be on the timing of the when the Fed will wind back its bond buying program. 

On Thursday, the weekly figures on claims for unemployment insurance are released together with the Philadelphia Federal Reserve survey, industrial production and the leading index. The “Philly Fed” index is tipped to ease from +19.5 to +19 in August, while the leading index is expected to post a 0.3 per cent gain in July after the outsized 0.6 per cent gain in June.

On Friday, the University of Michigan releases preliminary estimates of consumer sentiment for August. 

Sharemarket, interest rates, currencies and commodities

The Australian earnings season cranks up in the coming week. Amongst companies reporting results: Newcrest mining, Ansell, Bendigo & Adelaide Bank, JB Hi-Fi, and Aurizon (Monday); Challenger, Propertylink Group, and GPT Group (Tuesday); CSL, Computershare, Woodside Petroleum, Vicinity Centres, Invocare, Sonic Healthcare, AVEO Group, Dexus Property Group, Origin, Fairfax, Fletcher Building, PACT Group, SEEK, Iluka Resources and Stockland (Wednesday); Whitehaven Coal, Mirvac Group, ASX, Telstra, Cochlear, Webjet, Tatts Group, Treasury Wine Estates, QBE Insurance Group, Wesfarmers, Investa Office Fund, IPH, Adelaide Brighton and IRESS (Thursday); Spark New Zealand, Primary Health Care and Mantra Group (Friday).

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Investor signposts: RBA Governor faces grilling

Friday, August 04, 2017

By Craig James

In Australia over the coming week, a bevy of indicators are set for release covering confidence levels, business conditions and lending. The testimony of the Reserve Bank Governor to the House of Representatives Economics committee on Friday is one of the highlights.

The week kicks off on Monday with the release of job advertisements data – a key leading indicator of the job market. Job advertisements rose by 2.7 per cent in June to 175,091 ads – a near 6½-year high. Advertisements have been volatile in the past five months but are still up 10.5 per cent on a year ago. And while jobs are now filled through a variety of mechanisms, the job ads data remains instructive.

Also on Monday there is a Bank Holiday in NSW.

On Tuesday, NAB releases its July business survey. The business conditions index rose from +10.9 points to a 9½-year high of +15.1 points in June (long-term average +5.1 points). The business confidence index rose from +7.5 points to +9.3 points (long-term average +5.8 points).

Also on Tuesday, the weekly consumer confidence data from ANZ and Roy Morgan is issued. Consumer spirits have recently been buoyed by the firmer Aussie dollar – raising the appeal of foreign travel and overseas purchases.

On Wednesday, the Australian Bureau of Statistics (ABS) issues the June data on home loans. The number of loans (commitments) for budding home owners (owner-occupiers) rose by 1.0 per cent in May. And the value of all home loans rose by 1.3 per cent in the month.

Based on the Bankers Association data, the number of loans may have lifted 3 per cent with the value of loans up 1 per cent. Still, it is important to track the loans actually advanced as cancellations have been rising.

Also on Wednesday, Westpac and the Melbourne Institute issue the August monthly consumer confidence index. This release is more a check on the weekly confidence survey results.

The Reserve Bank’s Assistant Governor (Financial Markets), Christopher Kent, also delivers a speech on Wednesday at The Bloomberg Address.

On Friday, the ABS releases the lending finance data for June. These statistics cover housing, personal, commercial and lease finance commitments – in other words, the broadest measure of new lending in the economy. Total new lending commitments fell by 3.1 per cent in May to a 3-month low. Commitments were down 0.5 per cent over the year. Personal loans were especially weak, down 18.4 per cent on a year ago. In trend terms personal loans were at 14½-year lows.

Also on Friday the Reserve Bank Governor, Philip Lowe, faces his customary bi-annual grilling from members of the House of Representatives Economics Committee. Depending on the quality of questions posed, the testimony could provide investors with great insights on the direction for monetary policy.

US and Chinese data share equal billing

There is a good array of both Chinese and US economic data in the coming week with the spotlight largely focussed on inflation.

In the US, the week begins on Monday with the release of the consumer credit figures – a key measure of household borrowing. In May, consumer credit rose by $18.4 billion – the biggest lift in six months.

On Tuesday in the US, the National Federation of Independent Business releases its July survey of small business optimism. And on the same day the JOLTS job openings data for June is issued together with the weekly survey of chain store sales. 

In China on Tuesday the July international trade data is released. In June both exports and imports rose at a healthy annual rate. Exports were up 11.3 per cent with imports up 17.2 per cent.

In China on Wednesday, the July data on consumer and producer prices are released. Producer prices are up 5.5 per cent on a year ago but are off recent highs. Meanwhile consumer inflation is being restrained by softer food prices. Non-food inflation actually stands at 2.2 per cent – a little higher than in other major advanced nations.

In the US the quarterly data on labour costs and productivity is released on Wednesday. 

On Thursday, July data on producer prices is released with the weekly data on new claims for unemployment insurance. Economists are tipping a 0.2 per cent rise in the core measure of prices (excludes food and energy), keeping the annual rate near 2 per cent.

And on Friday the July data on consumer prices is released. Similar to producer prices, a 0.2 per cent lift in core consumer prices is expected.

Sharemarket, interest rates, currencies & commodities

The Australian earnings season cranks up a notch in the coming week. Amongst companies reporting results: SCA Property Group, Transurban, James Hardie and IOOF (Tuesday); Carsales.com, Skycity Entertainment and Commonwealth Bank (Wednesday); AMP, AGL Energy and Magellan Financial Group, Virgin Australia (Thursday); News Corp, REA Group (Friday).

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Investor signposts: Reserve Bank decides on interest rates

Friday, July 28, 2017

In Australia ‘top shelf’ indicators make a return in the coming week and the Reserve Bank Board meets to decide interest rate settings.

The week kicks off on Monday when the Reserve Bank releases the Financial Aggregates publication – a publication that contains private sector credit (lending) data and money supply figures. New home sales data for June will also be issued by the Housing Industry Association 

On Tuesday, CoreLogic releases the latest data on home prices together with the Performance of Manufacturing data. 

On current indications, Australian home prices may have posted another solid rise in July, up by around 1.6 per cent. The daily data indicates that Melbourne prices have lifted 3.1 per cent so far in July with Sydney prices up by 1.5 per cent.

The weekly consumer confidence data from ANZ and Roy Morgan is also issued on Tuesday. At present consumer sentiment is at a 5-month high.

Also on Tuesday the Reserve Bank Board meets. Rewind twelve months and the RBA were cutting rates. Now the expectation is that the next move in rates will be up, not down.

But the speculation is a little premature and we expect the Board statement will be more balanced about how the economy is performing at present.

On Wednesday, the Australian Bureau of Statistics (ABS) will issue data on building approvals – a leading indicator of home building. And the Federal Chamber of Automotive Industry releases data on new car sales for July. Car sales are rising because affordability is the best on record.

On Thursday the ABS releases the June trade data – figures on exports and imports. Australia is paying its way in the world at present with exports exceeding imports. And there is even the possibility that the broader current account may record a surplus in the June quarter for the first time in around 40 years.

On Friday, the ABS releases the retail trade data for June. Not only will the monthly figures be released but also the June quarter spending estimates for the volume of goods sold as well as data on retail prices.

Also on Friday the Reserve Bank releases the quarterly Statement on Monetary Policy. Not only does the report contain the latest economic assessment, but it also includes the pivotal inflation and economic growth forecasts that ultimately determine where interest rates are headed.

New month: attention shifts to US jobs

The calendar clicks over from July to August, so that means the US jobs report and global purchasing manager surveys are scheduled for release.

And the data releases kick off on Monday, when the Chinese National Bureau of Statistics releases the purchasing manager surveys for manufacturing and services. The private sector Caixin version of the manufacturing purchasing manager’s survey is released on Tuesday with the services sector index issued on Thursday.

In the US, the week begins on Monday with the release of the Chicago purchasing manager’s survey and the pending home sales index.

On Tuesday in the US, the personal income and spending figures for June are released with a 0.3 per cent lift in income tipped to outpace a 0.2 per cent lift in spending. The Federal Reserve’s preferred inflation measure – the core personal consumption deflator (excludes food and energy) – is also issued.

Also on Tuesday in the US, data on construction spending is released with the ISM manufacturing survey, new vehicle sales data and the weekly survey of chain store sales.

On Wednesday, the ADP National Employment index is released – a key measure of private sector payrolls. While not always lining up, the ADP survey is seen as a guide to the ‘official’ jobs data (to be released on Friday). The ISM New York index is also issued on Wednesday with weekly home finance data.

On Thursday, the Challenger series on job layoffs is released in the US with factory orders, the ISM services index and the weekly data on new claims for unemployment insurance.

But most investors are waiting for Friday when the non-farm payrolls (employment) data is released in the US. Economists tip an 180,000 lift in jobs, a 0.3 per cent rise in wages (earnings) and a fall in the jobless rate from 4.4 per cent to 4.3 per cent. That combination of figures may provide a boost to the US dollar and again put the Federal Reserve on course to lift interest rates.

Sharemarket, interest rates, currencies and commodities

The US earnings season continues in the coming week. Amongst stocks to watch are Loews Corp (Monday); BP, Honda Motor, Pfizer, Apple, Genworth Financial and ResMed (Tuesday); Office Depot, Time Warner, Tesla (Wednesday); Yum Brands, Hyatt Hotels, Kellogg (Thursday); and Berkshire Hathaway (Friday).

The Australian earnings season also cranks up in the coming week. Stocks to watch include Navitas, CYBG Plc (Tuesday); Rio Tinto, BWP Trust (Wednesday); Suncorp, Downer EDI (Thursday); Crown Resorts, Tabcorp (Friday).

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Investor signposts: Inflation takes centre stage

Friday, July 21, 2017

By Craig James

In Australia, inflation data will dominate the calendar in the coming week. And the data will be of particular importance in light of the global central bank discussion on normalisation of interest rates and ahead of the upcoming Reserve Bank Board meeting. In the US, the data focus will be on home prices and economic growth. But for investors and traders, the focus will be on the US Federal Reserve meeting on Tuesday and Wednesday.

In Australia the week kicks off on Monday with CommSec releasing the quarterly State of the States economic performance report. 

On Tuesday, Roy Morgan and ANZ release the weekly consumer sentiment reading. Confidence levels have eased in the past fortnight from 12-week highs and sentiment is now down by 2.1 per cent on a year ago.

On Wednesday, inflation data (the Consumer Price Index) for the June quarter is released. The “official” inflation data only comes around once a quarter in Australia so the figures are keenly awaited. 

For the record, the CBA Group is tipping a modest result. A lift in prices of 0.5 per cent is expected over the quarter with annual inflation expected to hold near 2.1 per cent.

Over the quarter, the price of petrol fell by 2.5 per cent, capping the headline result. But more importantly, investors will focus on the “underlying” measures that exclude petrol, as well as the non-tradable price measures that focus on domestic price pressures.

We expect that underlying inflation grew 0.5 per cent in the June quarter and around 1.7 per cent over the year. Clearly, inflation remains well contained. And despite recent media speculation of an imminent rate hike, the Reserve Bank has plenty of time to gauge how the economy is travelling before needing to lift interest rates.

Also on Wednesday, the Reserve Bank Governor delivers a speech entitled “The Labour Market and Monetary Policy”. In light of the inflation data and the new estimates of the “neutral” cash rate, most investors will want some guidance on how far off are interest rate changes.

On Thursday, the Australian Bureau of Statistics (ABS) will issue data on export and import prices for the June quarter.

And on Friday, the ABS releases the producer price indexes – key measures of business inflation. It will be important to see what impact the volatile Aussie dollar has had on prices of imported goods across the docks. Still, the impact of the recent surge in the Australian dollar will not be felt until the September quarter result.

US Federal Reserve to decide rate settings

While the focus is primarily on inflation in Australia, a broader array of events are scheduled in the US. Not only does the Federal Reserve policy-making committee meet but influential economic data including economic growth figures will be issued.

The data releases kick off on Monday, when Markit releases “flash” (or early-warning) readings on manufacturing activity for the US as well as Europe and Japan. 

Also on Monday in the US, data on existing home sales are released. Analysts expect annualised sales to rise further to 5.65 million in June after the 1.1 per cent lift to 5.62m in May.

Over Tuesday and Wednesday, the Federal Reserve Open Market Committee meets to decide monetary policy settings (result released at 4am Sydney time on Thursday). Given that rates were only lifted in June, no rate hike is expected. However the text of the decision will be important in determining whether the Fed is on course to lift rates later this year.

Also on Tuesday data on consumer confidence is released together with two home price measures (CaseShiller and Federal Housing Finance Agency) and the influential Richmond Federal Reserve index. Annual growth of home prices may have lifted to 5.9 per cent while consumer confidence may have eased modestly. 

On Wednesday, new home sales data is issued alongside the weekly data on mortgage applications, durable goods, wholesale inventories and the Chicago Fed National Activity index. The preliminary June data on durable goods orders will be closely watched as it provides some colour on the level of business investment. Orders are expected to have risen by 2.7 per cent in June after the 0.8 per cent slide in the prior month. In terms of new home sales, housing activity has remained healthy and June new home sales may have lifted by 0.3 per cent.

On Thursday, the first reading or the “advance” measure of economic growth in the June quarter will be issued in the US. Economists expect that gross domestic product (GDP) grew at a solid 2.6 per cent annualised rate in the June quarter, up from the weather-affected 1.4 per cent growth in the March quarter. Of note though, the softness in consumer spending over the quarter has the potential to dampen the result.

The usual weekly data on claims for unemployment insurance is also issued on Thursday together with the Kansas City Fed index. And on Friday, the final July University of Michigan consumer sentiment index reading is released.

Sharemarket, interest rates, currencies and commodities

The US earnings season cranks up a notch in the coming week. And there is certainly hope for a good season of profit results. According to Thomson Reuters I/B/E/S, US S&P 500 earnings are expected to grow by 8 per cent compared with a year ago. And given the recent record highs across US indices, a lot of that growth in earnings is already priced in.

On Monday, 71 stocks are expected to report including Alphabet, Hasbro, Moelis, and Haliburton. On Tuesday, there are another 194 companies listed including Caterpillar, 3M, Newmont Mining, and Domino’s Pizza. On Wednesday, earnings results are expected from 263 companies including Ford, and GlaxoSmithKline. On Thursday, 425 companies should issue profit results including Amazon, Intel, ConocoPhillips and Dow Chemical. On Friday, there are 75 companies listed including Exxon Mobil, Chevron, and Merck.

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Investor signposts: RBA dominates next week

Friday, July 14, 2017

By Craig James

If it wasn’t for the Reserve Bank, the coming week would be largely devoid of market-moving events. There are three speeches scheduled by Reserve Bank officials, in addition to the publication of minutes of the last policy-making Board meeting. There are also figures on car sales and jobs to watch.

In Australia the week kicks off on Tuesday with the Australian Bureau of Statistics (ABS) releasing data on new vehicle sales. The industry data has already been released by the Federal Chamber of Automotive Industries and that showed that sales in June were the highest on record for a June month.

Clearly both businesses and consumers have been active in buying new vehicles. In June, 52% of sales went to private buyers; 40% of vehicles were bought by businesses; and the remainder were purchased by government or rental companies.

Also on Tuesday the Reserve Bank releases details (“minutes”) of the Board meeting held on July 4. There was much conjecture that Board members would make take on a more ‘hawkish’ posture at the meeting – that is, raise the prospect of higher interest rates ahead.

Instead the text of the rate decision deviated little from that used in the past couple of months. Still, analysts will look closely at the Board minutes in the hope of uncovering some subtle changes in rhetoric.

In addition, ANZ and Roy Morgan release the weekly consumer sentiment survey on Tuesday. Lower fuel prices are serving to boost sentiment although offset by on-going political wrangling.

On Wednesday, the Head of the Reserve Bank’s Economic Analysis Department, Alex Heath, will participate at the Women in Economics panel at the Australian Conference of Economists.

On Thursday, the ABS will release the monthly job report. In May, employment surprised all and sundry by rising by 42,000 in May after rising by 46,200 in April (previously reported as a rise of 37,400 jobs). Full-time jobs rose by 52,000 while part-time jobs fell by 10,100. By contrast, economists had tipped a near 10,000 increase in jobs. And not only did jobs lift, but hours worked rose by 1.9% in May (biggest rise in 11 years) and the unemployment rate fell from 5.7% to a 4-year low of 5.5%.

In June we suspect employment rose by a more pedestrian 15,000 while the jobless rate probably held stable. Another month of strong job growth would start to generate speculation that higher wages lay ahead. The implication is that this could lead to higher price inflation and higher official interest rates.

Also on Thursday the Commonwealth Bank will release the June results of its Business Sales Indicator – a measure of economy-wide spending derived by assessing credit and debit card transactions.

On Friday, there are two speeches from senior Reserve Bank officials. In Adelaide, Deputy Governor Guy Debelle delivers a speech – “Global Influences on Domestic Monetary Policy” – at the CEDA/University of Adelaide luncheon.

And in Melbourne on Friday, Michele Bullock, Assistant Governor (Financial System), speaks at the Melbourne Institute/The Australian Economic & Social Policy Conference.

Chinese economic growth figures take centre-stage

In the coming week, investor attention will be dominated by the release of the Chinese economic growth figures.

In fact the week kicks off in China on Monday with these June quarter economic growth figures. While some may question the veracity of the data given that it is issued just 17 days after the end of the quarter, it still has the potential to move financial markets, especially currencies.

In the March quarter, the Chinese economy – the world’s second largest – grew at an impressive 6.9% annual rate and 6.8% growth is tipped in the June quarter.

Also on Monday, the Chinese National Bureau of Statistics will release monthly data on retail sales, production and investment.

In the US on Monday, the New York Federal Reserve releases its influential regional manufacturing survey.

On Tuesday in China, the June data on house prices is released. Annual growth has likely peaked, although growth was still lofty at 10.9% in the year to May.

In the US on Tuesday, there is a bevy of data to be released – although to be honest, it is unlikely to cause a ripple in financial market pricing. The National Association of Home Builders releases its July Housing Market index. In addition, June figures on import and export prices are released together with May data on capital flows and the usual weekly data on chain store sales.

On Wednesday, in the US the June data for building permits and housing starts are released. The figures provide early guidance on housing market and retail activity. The problem is that the data can prove volatile from month-to-month. In May, starts fell by 5.5% but an 8% rebound in commencements is expected in June.

On Thursday, the weekly figures on claims for unemployment insurance are released together with the June leading index and the influential Philadelphia Federal Reserve business index. The leading index may have lifted by 0.3% in June after a similar rise in May. But the Philly Fed index is tipped to ease from 27.6 to 22.9 in July.

Also on Friday, data on business inventories is issued, alongside industrial production, and the University of Michigan confidence reading.

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Investor signposts: household and business confidence in focus

Friday, July 07, 2017

By Craig James

Another big week of economic events is in prospect in Australia and overseas. In Australia the focus will be on business and household confidence as well as the lending landscape. In China, trade and inflation indicators are released throughout the week. In the US, Federal Reserve chair, Janet Yellen, gives testimony on the economy while data on retail sales and consumer prices are the highlights.

In Australia the week kicks off on Tuesday with the Australian Bureau of Statistics (ABS) release on housing finance. Despite the tighter lending standards adopted by the banking sector, and based on data from the Bankers Association, it is likely that loans for owner-occupiers (those who want to live in the homes) rose by around 2.5% in May after falling by 1.9% in April. And the total value of all new loans may have risen by 1.9% in the month.

Also on Tuesday the National Australia Bank business survey is released alongside the ANZ and Roy Morgan weekly consumer sentiment survey. The business survey covers key business indicators, a reading on business confidence as well as gauges on prices, wages and finance. The indicators of confidence and conditions have showed encouraging improvement since the Budget, with a particular focus on a lift in profitability.

On Wednesday the monthly Westpac consumer confidence index was released. The weekly survey has shown that households are in a happy place, with confidence levels holding at a 12-week highs. And it is likely that both readings will get a further boost following the improvement in job security and lower petrol prices.

On Thursday, the ABS will release lending finance figures – including housing, personal, business and lease loans. Total lending statistics fell from 4-month highs in April, down by 3.7% to $70.2 billion.

Also on Thursday, the Reserve Bank releases data on credit and debit card lending. Consumers continue to cut back on credit card debt. In smoothed terms (12-month average) the average balance was down by 0.8% on a year ago. Interestingly credit card accounts lifted by 1.2% in the past year, whilst debit accounts grew by almost 8% – highlighting the shift away from debt.

On Friday. The ABS releases the Overseas Arrivals and Departures publication that has information on both tourism and migration flows. Chinese tourists are still flocking down under. Tourists from Greater China (China and Hong Kong) comfortably exceed those from New Zealand, but tourists from mainland China should pass NZ in their own right in the next few months.

Spotlight on US and Chinese data; Fed Chair Testimony

So-called ‘top shelf’ economic indicators are released in China in the coming week. And in the US Federal Reserve Chair, Janet Yellen, testimony will draw the most interest alongside retail sales and consumer price data released on Friday.

China will actually kick off proceedings over the week – with the release of inflation data on Monday. Similar to what has been seen across the globe, inflation in China has lifted over the past year, but remains well contained. In fact producer prices (business inflation) - which was in a deflationary environment 12 months ago - is now up 5.5% over the year.

In the US, on Monday the Labour Market Conditions index is released alongside consumer credit data. It is widely expected that consumer credit lifted by around $15 billion in May.

On Tuesday, the National Federation of Independent Business releases its Business Optimism index alongside the JOLTS survey of job openings and data on wholesale inventories and sales. For the record, inventories are expected to have lifted by 0.3%.

On Wednesday the Federal Reserve chair, Janet Yellen, delivers the "Semi-annual Monetary Policy Report" to the House Financial Services Committee. The hope is that the report and testimony from the Federal Reserve chair will clear up a lot of issues related to how the Fed believes the economy is faring, timing of balance sheet adjustments and where rates are headed over the medium term.

Also on Wednesday the US Federal Reserve releases the Beige Book - the indicator is a ‘qualitative’ survey of economic conditions across 12 Fed districts - released ahead of Federal Reserve interest rate decisions. In addition the usual weekly data on home purchase and refinancing is issued.

On Thursday, the weekly figures on claims for unemployment insurance are released together with the June data on producer prices and the monthly budget statement. The producer price index (business inflation) is expected to remain tame. Analysts expect a 0.1% rise in the “core” rate (excludes food and energy).

In China on Thursday, trade data (exports and imports) is slated for release. A trade surplus of $42.1 billion is forecast.

And we have to wait till Friday for the key ‘top shelf’ indicators for the week – namely retail sales and consumer prices. Economists tip a 0.1% increase in June retail sales after the 0.3% slide in May. No doubt fluctuating petrol prices are having a significant influence on the results. Encouragingly core sales (sales less autos and gasoline) are expected to have lifted by 0.3% in June.

The consumer price index is tipped to lift by just 0.1% in June, excluding food and energy prices which are expected to rise by only 0.2%. Clearly inflation remains well contained and allows the Federal Reserve to time to gauge how the economy is faring before raising interest rates.

Also on Friday, data on business inventories is issued, alongside industrial production, and the University of Michigan confidence reading.

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Investor Signposts: RBA to make cash rate call

Friday, June 30, 2017

By Craig James

A busy week lies ahead. The Reserve Bank meets and key economic indicators will be released in Australia. Overseas, purchasing manager survey results dominate with payrolls data to be issued in the US. 

The week in Australia

In Australia, the week kicks off on Monday, with CoreLogic issuing its closely-watched home value index for June. And it seems that Sydney and Melbourne prices have kicked again. Based on current data, home prices may have lifted by 1.5 per cent in June after recording a seasonal decline of 1.1 per cent in May.

Also on Monday the Performance of Manufacturing index is issued with building approvals and the ANZ survey of job advertisements. 

The manufacturing sector is relatively healthy at present, with the latest gauge from Australian Industry Group showing that activity eased modestly in May from 15-year highs.

The building approvals data from the Australian Bureau of Statistics (ABS) can be volatile from month to month. But it is the best early gauge of future construction, so the figures are analysed closely. Approvals have peaked but are not showing signs of slumping. Underlying demand for homes remains solid. 

The ANZ job advertisement series hit fresh six-year highs in May, and has lifted in four of the last five months. Job ads tend to lead employment by around 5-6 months so the outlook for the job market remains healthy. 

On Tuesday, the Reserve Bank meets to decide interest rate settings. Meanwhile, retail trade data is issued by the ABS, while ANZ and Roy Morgan publish the usual weekly consumer confidence figures.

The Reserve Bank won’t be touching the official cash rate. In fact, many economists believe the Reserve Bank could stay on the sidelines for the best part of another year.

The retail trade data should prove interesting. Survey and anecdotal evidence suggest that consumers are spending more, especially on services as opposed to traditional purchases like clothes and shoes.

On Thursday, the ABS releases the May data on international trade – in other words, the monthly export and import figures. The main complication with interpreting the results at present is the impact of Cyclone Debbie in disrupting coal and some agricultural exports. But in an underlying sense, healthy trade surpluses are being recorded.

Overseas: US jobs data in focus

It is a holiday-shortened week in the US, with the Independence Day holiday celebrated on July 4. And no doubt many Americans will be keen to take an extra day of leave on the Monday, which could make for quiet times on financial markets early in the week. The data release of note is the non-farm payrolls figures to be released on Friday.

The week begins on Monday in the US, with data on construction spending and new vehicle sales to be released as well as the ISM manufacturing index. Economists expect that vehicle sales rose by 1.4 per cent in June to a 16.9 million seasonally adjusted annual rate. And the manufacturing gauge is tipped to be flat at 55.0 – still well ahead of the 50 reading that divides expansion from contraction.

After a holiday on Tuesday, there are a spattering of indicators on the US menu for Wednesday. Data on factory orders is released with the ISM New York index.

In the US on Thursday the ISM services index is released together with the Challenger job layoffs series, ADP employment data, international trade figures and weekly data on claims for unemployment insurance.

Arguably, the ISM services index is of most importance, with economists tipping a modest fall from 56.9 to a still very healthy reading of 56.6 in June. The other indicator of note is the ADP jobs data, which can provide guidance on the official employment figures on Friday. Economists tip a 178,000 lift in private sector jobs.

And on Friday in the US, the influential non-farm payrolls data is issued. Economists expect that job creation lifted from 138,000 to 183,000 in June. While unemployment is seen as unchanged at 4.3 per cent, average hourly earnings (wages) may have grown by 0.3 per cent. If wages and jobs fail to lift as expected, further doubt will be thrown on the need – or the likelihood – of the Federal Reserve lifting rates again in 2017.

In China, the key dates for economic indicators are Monday and Wednesday. On Monday, the Caixin purchasing manager’s survey for manufacturing is released. And on Wednesday, the equivalent gauge for the services sector will be released.

Financial markets

Over 2016/17 the All Ordinaries index has tracked a range of just over 844 points – from almost 5,140 points to just over 5,980 points. At face value, the range sounds significant – that is, before we put it in the context of history. The differential between highs and lows is 16.4 per cent, marking it as the least volatile year in 16 years.

The average differential for the All Ords over the period is actually just below 27 per cent, so it is clear that the share market has been generally well behaved.

Another way to look at volatility is the number of daily moves either above or below 1 per cent. Over the past year, there have been 31 days where the share market has risen or fallen by 1 per cent in a day – the lowest result in 12 years.

 

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Investor Signposts: The financial year draws to a close

Friday, June 23, 2017

By Craig James

The financial year is drawing to a close, but there are no ‘first tier’ indicators to either close out the year, or usher in the new financial year. In the coming week, most interest will be on the latest demographic information.

Census Data

In Australia, the week kicks off on Tuesday when the Australian Bureau of Statistics (ABS) releases the first data from the 2016 Census. Across Australia, housing conditions are decidedly mixed. So the latest figures will throw new light on the true state of underlying demand for homes. At the same time, the ABS will release the December quarter population figures – figures that you would expect would be newly calibrated with the latest Census data.

The NSW, Victorian and ACT economies are leading the way at present because population growth in each economy is either near, or above, the decade-average – lifting the demand for homes as well as economic and social infrastructure.

Other data of interest

On Tuesday, ANZ and Roy Morgan publish the usual weekly consumer confidence figures. Lower petrol prices may have lifted spirits in the past week. Consumer confidence is merely OK at present.

On Thursday, the ABS releases the quarterly job vacancies data – a key leading indicator of the job market. And just like the monthly job advertisements data, the job vacancies figures have, for some time, signalled an improvement in labour market conditions. It is clear that these positive signals are now being reflected in the official data on employment and hours worked.

Also released on Thursday is the “Finance and Wealth” publication from the ABS. The data includes estimates of household debt and financial wealth, as well as statistics such as foreign ownership of shares and bonds and cash holdings of superannuation funds. Wealth in Australia is at record highs.

And also on Thursday, the Housing Industry Association releases the latest data on new home sales. If the data shows that more homes are being sold, then this could reinvigorate the early stage of the housing pipeline such as new applications to build homes.

On Friday, the Reserve Bank releases the Financial Aggregates publication, a publication that includes data on private sector credit (effectively, data on outstanding loans across the economy).

Overseas: The 2017 year is almost half over

While in Australia the focus in the coming week is on how the 2017/18 year has finished, overseas the key interest is on reviewing the performance of the first half of the 2017 calendar year.

The week begins on Monday in the US with May data on new orders for durable goods – goods like cars and computers that have a ‘shelf’ life’ greater than three years. Economists tip a 0.5 per cent fall in orders after the 0.8 per cent fall in April orders.

In the US on Tuesday, the CaseShiller measure of home prices is released with consumer confidence data. The usual weekly data on chain store sales is also released. The influential Richmond Federal Reserve survey is also released on Tuesday, with service sector gauges for the Texas economy.

In the US on Wednesday, the usual weekly data on mortgage applications is released together with advance data on international trade and inventories in the retail and wholesale sales sectors. In addition the pending home sales index is released.

On Thursday in the US, the final estimate of economic growth for the March quarter is issued. Annual growth is artificially low at 1.2 per cent with the underlying rate of growth closer to 2 per cent. 

And on Friday in the US, the May data on personal income and spending is released with the main interest centred on the Federal Reserve’s preferred measure of inflation. The final estimate of consumer sentiment for June is also issued together with the influential Chicago purchasing managers index.

In China on Friday, the National Bureau of Statistics will release purchasing manager survey results for manufacturing and services sectors.

Over the week, it is also worth noting that the San Francisco Federal Reserve President John Williams will be in Australia delivering a range of speeches.

Financial markets

It may come as a surprise, but the Australian sharemarket is set to post its strongest financial year performance in three years. Total returns on shares – as measured by the All Ordinaries Accumulation index – have lifted by 11.7 per cent so far in 2016/17 after 2 per cent growth in 2015/16 and 5.7 per cent growth in 2014/15. The ASX 200 index has lifted 8.3 per cent with the All Ordinaries up 7.4 per cent. 

While the Aussie sharemarket has lifted over the past financial year, other markets have done far better. The US Dow Jones index has lifted by 19 per cent in 2016/17 while the UK has gained almost 15 per cent and the Japanese Nikkei has risen by around 29 per cent. The Australian sharemarket ranks 55th of 73 bourses over the past year. Greece has been notable amongst the gainers, up 53 per cent.

Commodity prices have been decidedly mixed over 2016/17. The CRB futures index has fallen 13 per cent over the year, with oil down 12 per cent, gold down 6 per cent and sugar down 36 per cent. But iron ore prices have lifted 2 per cent, thermal coal has rise by 42 per cent and base metal prices have generally firmed over the period with lead, zinc and copper up between 18-25 per cent.

The Aussie dollar is on course for its least volatile year against the US dollar in 27 years. The range has been just US6.25 cents (from US71.52c to US77.77c). Over the financial year, the Aussie has lifted 1.8 per cent, making it just one of 45 currencies to lift against the greenback.

In terms of the official cash rate, there was only one change – the quarter per cent cut in the cash rate in August. The 1.5 per cent cash rate is the lowest since records began in 1959. 

Longer-term rates have been more volatile over 2016/17. Ten-year bond yields fell to as low as 1.85 per cent in August but rose as high as 2.99 per cent in March before settling near 2.40 per cent in the past month.

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Investor Signposts: What to watch

Friday, June 16, 2017

By Craig James 

There are no ‘top shelf’ indicators like retail sales or economic growth to be released in Australia over the coming week. But there are still plenty of indicators that can round out our knowledge about the economy.

In Australia, the week kicks off on Monday with the Reserve Bank Governor, Philip Lowe, providing comments in a panel discussion at the 2017 Crawford Australian Leadership Forum in Canberra. The scheduled comments are due at 9.30am, so a good way to start off the week with fresh insights on the economy.

Also on Monday, the Australian Bureau of Statistics (ABS) release the May data on new vehicle sales. Industry data has already been released and it showed that sales were the highest for any May month.

According to the Federal Chamber of Automotive Industries, new motor vehicle sales totalled 102,901 in May, up 6.4% on a year ago.

Passenger vehicles in May were up 1.6% on a year earlier, while sales of sports utility vehicles (SUVs) were up by 9.4% and other vehicles were up by 9.9%.

On Tuesday, the CommBank business sales indicator is released together with the ABS data on residential prices, while minutes of the last Reserve Bank Board meeting are also issued. ANZ and Roy Morgan publish the usual weekly consumer confidence figures. 

The CommBank business sales index is a measure of economy-wide spending. Meanwhile, the ABS data on home prices is a bit dated, covering the month of March. But the data includes estimates of the number of homes and the average number of people per home.

Based on the data, CommSec estimated that there were 2.476 people per home in December quarter 2016, down 0.4% on a year ago. The number of people per home has been falling in annual terms for 2½ years.

Surprisingly, the number of homes in Australia grew by 172,800 in the year to December after recording annual gains of 185,800 in September and 182,400 in June. It was the smallest annual lift in homes for 15 months.

The minutes of the Reserve Bank Board meeting are always closely dissected by analysts and investors. Comments on the job market, housing and the Federal Budget will attract most attention.

And investors will monitor whether consumer confidence has continued its trend improvement over the past month.

On Thursday, the ABS releases the usual detailed monthly data on the job market. However, each quarter the ABS provides additional estimates on employment by industry, so the May data will be of interest.

The May data should confirm that the Healthcare sector is the biggest employer in Australia. 

Overseas: US Housing sector in focus

The focus is very much on the housing sector in the coming week, with new data to be released in China and the US.

The week begins on Monday in China, with the May data on home prices. As has been the case across the globe, investors have been stepping up purchases of homes given the low interest rates on offer. Chinese home prices are currently 10.7% higher than a year ago. Annual price growth peaked at 12.6% in November and has been easing in the period since.

In the US on Tuesday, the broadest measure of trade – the current account – is released, while the usual weekly data on chain store sales is also issued. The US trade accounts remain mired in red ink, with the current account in deficit by US$112.4 billion in the December quarter. By comparison, Australia’s current account is close to balance.

In the US on Wednesday, the usual weekly data on mortgage applications is released together with data on existing home sales. Economists expect that sales edged up from a 5.57 million annual rate to 5.60 million in May. Home sales were at decade highs of 5.7 million in March this year.

On Thursday in the US, the usual weekly data on claims for unemployment insurance is released with the Federal Housing Finance Agency data on home prices, the leading index and the Kansas City Federal Reserve survey. Home prices have been growing at a near 6% annual pace for around two years.

And on Friday in the US, data on new home sales is released. Home sales were at 9½-year highs in March and are trending near the highs. The Markit “flash” readings on manufacturing and services sectors are released in the US, Europe and Japan – timely gauges on activity.

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Jobs and consumer confidence in focus

Friday, June 09, 2017

By Craig James

A raft of key indicators is released over the coming week but the spotlight is primarily on the job market and consumer confidence figures.

In Australia, the week kicks off on Monday with a public holiday in all states and territories except Western Australia and Queensland. But the Reserve Bank Deputy Governor Guy Debelle is scheduled to deliver a speech to the Global FX Code of Conduct Launch in Hong Kong via video link.

On Tuesday, National Australia Bank releases the monthly business survey while ANZ and Roy Morgan issue weekly consumer confidence figures. And the Australian Bureau of Statistics (ABS) releases the Overseas Arrivals and Departures publication.

Aussie businesses are clearly in good shape. The NAB business conditions index rose from +12.3 points to +14.3 points in April, a 9-year high. And the business confidence index rose from +6.5 points to +12.9 points, a 7-year high.

Even consumer confidence has been improving, hitting an 8-week high in the latest week.

In terms of the arrivals/departures figures, most interest is in the inflow of Chinese tourists, rising at a double-digit annual rate. And the credit card data should continue the trend of consumers cutting outstanding debt.

On Wednesday, another reading of consumer sentiment is issued – this time the monthly survey conducted by Melbourne Institute and Westpac. The monthly survey is largely a check on the weekly version. The same questions are asked by both surveys and the sample sizes of each survey are broadly the same.

The main benefit of the June consumer sentiment survey is an additional quarterly question about where consumers believe are the wisest places to put new savings.

In the March survey, “Real Estate” had its lowest ‘favoured’ reading on record (since 1973) at 11.6 per cent. Most people favoured putting new savings in the bank as the wisest place for savings (29.0 per cent of respondents).

On Thursday, the ABS releases the May jobs data. And it will need to be pretty special to top the April figures. 

In April, employment rose by 37,400 in April after rising by 60,000 in March. And the unemployment rate fell from 5.9 per cent to 5.7 per cent. The only glitch was hours worked, which fell by 0.3 per cent. But even on this measure, hours worked were up by 1.3 per cent over the year – the strongest annual growth in 11 months.

The Commonwealth Bank Group is tipping no change in employment in May and no change in the jobless rate.

Also on Thursday, the Reserve Bank releases its quarterly Bulletin – a report containing articles that provide valuable insights into Reserve Bank thinking on key issues.

And the Reserve Bank Deputy Governor, Guy Debelle, delivers another speech on Thursday, this time to the Thomson Reuters industry event in Sydney.

Overseas: US Federal Reserve hogs the limelight

After an unusually quiet week, the US economic calendar is more congested in the coming week. And on Thursday, the monthly download of activity data is released in China.

The week begins on Monday in the US, with the May data on the Federal Budget to be released. The budget deficit has taken a back seat to other issues in recent years but that could all change with flagged tax cuts and infrastructure spending.

In the US on Tuesday, the National Federation of Independent Business (NFIB) issues the May survey of small business sentiment. On the same day, the producer price index for May is released, while the usual weekly data on chain store sales is also issued.

The US Federal Reserve also meets over Tuesday and Wednesday with the decision announced at 4.00am AEST on Thursday. Economists are in broad agreement that the Fed will lift rates by a quarter of a percent. But the commentary will be important in guiding future rate expectations.

In the US on Wednesday, the usual weekly data on mortgage applications is released together with data on consumer prices and retail sales for May. The core measure of consumer prices (excludes food and energy) may have risen 0.2 per cent in the month to keep the annual rate stubbornly below 2 per cent. 

Retail sales may have risen 0.2 per cent in May after a solid 0.4 per cent gain in April.

In China on Wednesday, the May data on retail sales, industrial production and investment are released – potentially market-moving for the Aussie dollar.

On Thursday in the US, the usual weekly data on claims for unemployment insurance is released with import/export prices, Philadelphia Federal Reserve survey and production. 

And on Friday in the US, housing starts, capital flows data, consumer sentiment and the NAHB housing market index are scheduled.

 

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