The Experts

James
Craig James
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.

What’s ahead for Oz and the world economy next week?

Thursday, August 16, 2018

Monday 20: August sales up, Chinese tourists up

The week kicks off when the Commonwealth Bank releases the latest Business Sales Indicator – a measure of economy-wide spending. Recent data has indicated firm growth in sales. The Australian Bureau of Statistics (ABS) releases the June data on arrivals and departures – both tourist movements and migration flows. Tourist arrivals rose by 1.4% to 766,300 in May, up from a downwardly-revised 755,800 (previously 756,300) in April. Departures also rose, up by 1.2% in May to a record high of 938,800, up from an upwardly-revised 927,700 (previously 923,400) in April. China was again the largest source of tourists to Australia – 1,432,600 came to Australia from China, ahead of the 1,366,500 visitors from New Zealand.

Tuesday 21 August; Consumer confidence

The Reserve Bank releases the minutes of the meeting held on August 7. Much has already been communicated but analysts will be looking for insights provided by the Bank’s liaison program. The Reserve Bank Governor also delivers a speech in Canberra on Tuesday, at the breakfast event to launch ASIC's National Financial Capability Strategy 2018. Also on Tuesday, the latest weekly reading on consumer confidence is issued by Roy Morgan and ANZ. Consumers are generally positive, with the strength of the job market a key influence.

Wednesday 22 August: Building data and jobs

The ABS releases building data: Construction Work Done for the June quarter. The estimates on residential building is incorporated in the dwelling investment component of the quarter’s economic growth data. Construction work done rose by 0.2% in real (inflation-adjusted) terms in the March quarter – the fifth gain in six quarters. Work done was up 5.0% on a year ago. Residential building rose by 0.4% in the March quarter. Also on Wednesday, the skilled vacancies data is released by the Department of Jobs and Small Business. Job vacancies have fallen for three straight months, suggesting a slowing of the strong job gains. The Reserve Bank Deputy Governor Guy Debelle also delivers a speech at the Economic Society of Australia in Brisbane.

Thursday 23 August: job market estimates

The ABS issues the detailed job market estimates for July, including demographic and geographic data.

THE WEEK AHEAD OVERSEAS

In the US, the release of minutes from the last Federal Reserve meeting will attract interest while housing dominates the data docket. The week kicks off on Tuesday when the usual weekly data on chain store sales is released.On Wednesday the Federal Reserve releases minutes of the last policy-setting meeting held over July 31/August 1. Analysts will be looking for anything that confirms views that a rate hike will be delivered next meeting.In terms of economic data, existing home sales figures are expected on Wednesday. In June, data showed a 0.6% fall in sales to a 5.38 million annual rate – a five month low. Home sales still stand 2.2% higher than a year ago.Also on Wednesday in the US, weekly data on new mortgage applications is issued.

On Thursday in the US, data on new home sales is released. In June sales were down by 5.3% to a 631,000 annual rate – an eight month low. Not only were sales down, but the stock of homes increased and the average sales price was down on a year earlier. Sales may have lifted 0.6% in July. Also on Thursday, the weekly data on new claims for unemployment insurance is also issued, together with the influential Kansas Federal Reserve manufacturing gauge. The Markit “flash” purchasing manager survey estimates are also issued on Thursday for the US, France, Germany, the Eurozone and Japan. On Friday in the US, the July data on durable goods orders is released – a measure of business investment. Orders rose by 1% in June, led by transport, after two months of declines. In July economists tip another 1% lift in orders.

COMPANIES REPORTING NEXT WEEK

The peak of the earnings season (profit-reporting season) has arrived. Amongst the Aussie companies expected to report earnings include:

On Monday are: Woolworths Group, Fortescue Metals Group, Ansell, Beach Energy, Greencross Ltd, NIB.

On Tuesday: Oil Search Limited, BHP Billiton Limited, Altium, Healthscope, Super Retail Group.

On Wednesday: A2 Milk Company Limited, Seven Group Holdings, Sydney Airport, Newcrest Mining Limited, Adelaide Brighton Limited, LendLease Group, South32 Limited, Ardent Leisure, APA Group, APN, Coca Cola Amatil, Worley Parsons

On Thursday: Qantas Airways Limited, Santos Limited, Qube Holdings Limited, Flight Centre Travel Group, Stockland, Alumina. Webjet, Village Roadshow, South32.

On Friday: Medibank Private Limited, Tassal, Sims Metal, Nine Entertainment, Mayne, Brambles, Afterpay.

 

 

Investor Signposts: Are wages on the rise?

Friday, August 10, 2018

The release of the June quarter Wage Price Index dominates the local agenda in the coming week. The semi-annual update on average weekly earnings will also be keenly observed together with the July jobs report.

The week kicks off on Monday with the Reserve Bank estimates of credit and debit card lending.

On Tuesday, the NAB business survey is issued. Business confidence fell to the lowest level in 20 months in June. But business conditions are just below the best levels on record, supported by the lower Aussie dollar, with profits near all-time highs.

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

On Wednesday, arguably the most important data release for the inflation and interest rate outlook is scheduled – the wage price index (WPI). The WPI rose by 0.5 % in the March quarter. Annual wage growth remained steady at 2.1 %.

But wages including bonuses rose to a 3-year high of 2.7 % over the year to March. An increase in the minimum wage and new Enterprise Bargaining Agreements are expected to push wages up by around 0.6 % during the quarter.

Also on Wednesday, the monthly Westpac and Melbourne Institute consumer confidence reading is released. The gauge rose by 3.9 % to 106.1 in July – the highest level in 4 1⁄2 years – with improving job security a key influence.

On Thursday, the ABS issues the July employment report. The unemployment rate is at 51⁄2-year lows of 5.37 % with a blockbuster 50,900 jobs created in June.

Strong population growth and a robust labour market have pushed the participation rate to near record highs of 65.7 %. CommSec tips an increase in total jobs of around 10,000 during the month.

The average weekly earnings data is released every six months by the ABS. The figures, also released on Thursday, are important as they provide dollar estimates of wages in the economy across states and industries.

On Friday the Reserve Bank Assistant Governor (Economic), Luci Ellis, delivers a speech at the Sir Leslie Melville Lecture Series Event in Canberra.

Overseas: China monthly activity data in focus

Over the coming week, China investment, production, retail sales and house price data are all issued. In the US, retail spending, housing, industrial production, business and consumer activity gauges will be in focus.

The week kicks off on Tuesday when China issues its monthly retail sales, investment and production activity data. During July, the Chinese government announced a “more proactive” fiscal policy stance, pledging to deliver additional tax cuts and quicken the issuance of local governments’ special bonds to support infrastructure spending. But domestic demand was hampered by extensive flooding and US auto import tariffs took effect on July 6, likely impacting sales.

Also on Tuesday the US export and import prices, weekly data on chain store sales and the small business sentiment gauge – the NFIB business optimism index – are all released.

On Wednesday China house prices data are issued by the National Bureau of Statistics. New house prices rose by 1.1 % in June, up from 0.8 % in May. It was the strongest growth rate in 21 months.

Also on Wednesday in the US, industrial production and retail sales data are issued. Household consumption rose by 4 % in the June quarter, boosting overall economic growth to 4-year highs of 4.1 %. Retail sales and industrial production are both tipped to lift by 0.3 % in July. Also, the National Association of Home Builders releases its August survey with the New York Federal Reserve manufacturing gauge and weekly data on new mortgage applications.

On Thursday, US housing starts and building permits data are issued for July. US homebuilding eased to a 9- month low in June and permits declined for a third successive month amid an acute shortage of homes available for sale. The weekly data on new claims for unemployment insurance is also issued, together with the influential Philadelphia Federal Reserve manufacturing gauge.

On Friday, the US Conference Board leading economic index and the University of Michigan consumer confidence survey are both released.

 

Investor signposts: RBA dominates the agenda

Friday, August 03, 2018

Australia: The Reserve Bank dominates the agenda

·         The Reserve Bank dominates the local agenda in the coming week. In overseas markets, inflation data is in focus in both the US and China.

·         The week kicks off on Monday with the release of the ANZ measure of job advertisements. Job ads have been choppy in recent months. In June, ads fell 1.7% from 7-year highs after rising by 1.4% in May. Job ads are still up 6.9% on a year ago. The number of jobs advertised (seasonally adjusted) was 175,660 in June while the trend level of job ads stood at a 7-year high of 177,692.

·         On Tuesday, the Reserve Bank Board meets to decide interest rate settings. The last move in rates was two years ago in August 2016. And given the recent tame inflation data, the period of inaction on rates should continue.

·         The Performance of Construction index is also released on Tuesday.

·         On Wednesday, the Australian Bureau of Statistics (ABS) will release the June data on housing finance.

·         In May the number of loans (commitments) by home owners (owner-occupiers) rose by 1.1 % – the first increase in six months. And the value of new housing commitments (owner occupier and investment) rose by 0.5%. Owner-occupier loans rose by 0.7% and investment loans fell by 0.1%.

·         Based on data from the Bankers Association, the value of home loans may have fallen by 1 % in June, signalling a flattening of home loan demand.

·         Also on Wednesday, the Reserve Bank Governor, Philip Lowe, delivers a speech to the Anika Foundation lunch in Sydney. The title of the speech is “Demographic Change and Recent Monetary Policy”. The Reserve Bank Governor will no doubt provide some top-level views given the recent tame inflation data and then these will be fleshed out on Friday with the monetary policy statement.

·         That quarterly Statement on Monetary Policy will be released at 11.30am Sydney time on Friday. The main focus will be the forecasts on inflation and economic growth (GDP) but no major changes are expected.

·         Also on Friday, the ABS will release the June lending finance figures. This data covers not just new home loan commitments but commercial, personal and lease loans.

·         In May, total new lending commitments (housing, personal, commercial and lease finance) fell by 1.4% to $67.4 billion. Commitments are down by 1.5% on the year. In trend terms, lending fell for the fifth straight month, down by 1.3% in May.

Overseas: Inflation in the spotlight

·         Inflation figures will be released in the US and China over the week. The sensitive Chinese international trade data (exports and imports) is also issued.

·         The week kicks off on Tuesday in the US when the JOLTS data is released – the Job Openings and Labour Turnover Survey. This survey is conducted by the Bureau of Labour Statistics and attempts to measure the level of labour demand or job vacancies. Vacancies eased by 202,000 in May but this was from record levels – the 6.64 million jobs waiting to be filled remains significant.

·         Also on Tuesday consumer credit data is released in the US. And the regular weekly data on chain store sales is issued.

·         On Wednesday in China, international data is issued. In June, exports were up by 11.3 % on a year ago with imports up 14.1%. The trade surplus stood at US$41.6 billion. In July, economists expect that imports rose at a 20.8 % annual rate with exports up 10%. Greater imports from the US combined with a smaller trade surplus would be viewed positively by White House officials.

·         On Wednesday in the US, the regular weekly data on new mortgage applications is issued.

·         On Thursday in China data on consumer and producer prices is expected. Consumer prices are currently up 1.9 % on a year earlier with producer prices up 4.7% – the latter boosted by higher commodity prices, especially petroleum products.

·         The US data on producer prices will be released on Thursday with data on wholesale inventories. The data on consumer prices is issued on Friday.

·         Also on Friday in the US is the monthly data on the federal budget (for the month of July). In China the July data on vehicle sales will be released.

 

 

 

Investor signposts: Which state will come out on top?

Friday, July 27, 2018

Australia: Which state will come out on top?

·        The handover from July to August occurs with a data deluge. The CommSec State of the States quarterly report is followed by housing, manufacturing and service-sector gauges, new vehicle sales and the retail trade report.  

·         The week kicks off on Monday with the release of the CommSec State of the States report. The report tracks the economic performance of the states and territories across eight key indicators. 

·         On Tuesday, building approvals, private sector credit, new home sales and the regular weekly gauge on consumer confidence from Roy Morgan and ANZ are all released. 

·         On Wednesday, CoreLogic releases the July data on home prices. Based on daily data released so far, home prices have fallen by 0.5 per cent in the five mainland capital cities to stand 2.3 per cent lower than a year ago.

·         Also on Wednesday both AiGroup and the Commonwealth Bank release survey results on manufacturing activity. And the Bureau of Statistics (ABS) issues its Selected Cost of Living indexes for the June quarter, detailing changes over time in the purchasing power of the after-tax incomes of Aussie households.  

·         On Thursday Australia’s international trade balance for June is issued. The trade surplus rose from $472 million in April to $827 million in May. It was the tenth surplus in 12 months. Annual exports to China rose to US$102.65 billion in May – a new record high.

·         On Friday the Federal Chamber of Automotive Industries releases the July sales data for new vehicles. And the ABS issues June data on retail trade. The growth in retail spending has lifted over the past nine months, led by the food and clothing categories. And as tax return time draws closer, the end of financial year new car sales will be closely monitored. SUV sales are at record highs, but passenger vehicles sales are declining.

·         Also on Friday both AiGroup and Commonwealth Bank release their services sector activity gauges.

Overseas: The US Federal Reserve and jobs data trumps China manufacturing activity

·         Over the coming week the US Federal Reserve meets to hand down its latest interest rate decision. And the US non-farm payrolls (employment) report is released. The Chinese manufacturing survey is also a key release. 

·         The week kicks off on Monday in the US when the June index of contract signings to purchase previously-owned homes (pending sales) and the influential Dallas Federal Reserve manufacturing index are issued.

·         On Tuesday China’s official purchasing manager’s indexes are released. A further slowdown in manufacturing activity is tipped. In the US, attention will turn to the S&P/Case-Shiller 20-city home price gauge, the Conference Board’s consumer confidence index and the regular weekly data on chain store sales.

·         Also on Tuesday, the influential Chicago manufacturing survey and the personal income/spending report are 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 for a second successive month in June.

·         On Wednesday policymakers at the US Federal Reserve hand down their interest rate decision. No change in the Federal Funds rate target range of 1.75-2.00 per cent is expected by economists after June’s increase. Additional rate hikes are forecast in September and December.  

·         Also on Wednesday weekly data on new mortgage applications, the ISM manufacturing index and the ADP private sector employment report are issued. Earlier in the day, China’s Caixin manufacturing survey is released. 

·         On Thursday US factory orders are scheduled for June. Manufacturing activity has been supported by strong domestic demand. But growing worker shortages and import tariffs are starting to strain the supply chain. The regular weekly data on new claims for unemployment insurance and the ISM New York index are also issued.

·         On Friday China’s Caixin services gauge is released for the month of July, together with the June international trade data (exports and imports), the ISM services index and the all-important US non-farm payrolls (jobs) report. In June, 213,000 jobs were created and economists expect a further 195,000 jobs were generated in July. Average hourly earnings are tipped to lift by 0.3 per cent, with annual growth remaining at 2.7 per cent.

Financial markets

·         The Australian earnings season is approaching, coming at a time when the Aussie sharemarket has been trading at 10½-year highs. With a valuation of 15.5 times estimated earnings, the ASX200 index is trading around its 5-year average. And at 4.1 per cent, dividend yields for the benchmark are twice that of equivalent US benchmarks.

·         Corporate balance sheets are in good health, profits are near record highs and the lower Aussie dollar may boost the offshore earnings of some companies. Earnings growth expectations are broadly improving, supported by the resources sector. 

·         On Tuesday Credit Corp Group and Alacer Gold report. On Wednesday, BWP Trust, Genworth Mortgage Insurance and Rio Tinto all report. On Thursday, earnings are due from ResMed.

 

Will consumer and business prices lift?

Friday, July 20, 2018

Australia: Will consumer and business prices lift?

·         The focus of investors this week will be on consumer and business inflation. Trade (export/imports) prices are also released. Further information on the jobs market will be keenly observed.

·         The week kicks-off on Tuesday with the regular weekly gauge on consumer confidence from Roy Morgan and ANZ.

·         On Wednesday the Bureau of Statistics (ABS) releases the much-anticipated June quarter Consumer Price Index – the main measure of inflation in Australia.

·         We expect that headline consumer prices lifted by 0.6 % in the June quarter to be up by 2.3 % over the year. But “underlying” measures of inflation are tipped to be more subdued, lifting by 0.5 % for the quarter and 1.9 % for the year.

·         Significant contributions are forecast from rising petrol prices of around 0.2 percentage points and health (around 0.15 percentage points), while alcohol & tobacco prices are expected to lift too. Falling recreation, communications and fruit prices will keep overall prices in check. With core inflation tipped to remain anchored near the bottom of the Reserve Bank’s 2-3 % target band in the near term, an extended period of interest rate stability is likely for the remainder of this year.

·         Also on Wednesday the latest skilled internet job vacancy index is issued by the Department of Jobs and Small Business. Vacancies fell by 0.9 % in May, but are up 5.8 % over the year.

·         On Thursday trade prices are released for the June quarter. Both export (down 1.0 %) and import prices (down 2.0 %) are tipped to decline, but are up 4.9 % and 2.1 % annually.

·         Also on Thursday the ABS issues detailed job data, including information on employment by industry.

·         On Friday the Producer Price Indexes – measures that will provide a guide on inflation across the business sector – are issued. In the June quarter, the ‘final demand’ measure was up 0.5 % to stand 1.7 % higher over the year. According to the ABS “the past several quarters have shown significant input price pressures evident across a number of industries.”

Overseas: US economic growth and housing in the spotlight 

·         It is relatively quiet in China over the coming week in terms of new economic data. However, there will be data on industrial profits on Friday. In the US, housing market indicators and economic growth are of most interest.

·         The week kicks off on Monday in the US with data on existing home sales to be released alongside the Chicago Federal Reserve National Activity index. After a 0.4 % fall in May, economists are tipping a 1.5 % lift in home sales in June. A chronic lack of stock on the market is constraining sales, but boosting prices.

·         On Tuesday, the influential Richmond Federal Reserve survey and the regular weekly data on chain store sales are both released, together with home prices. Home prices have are tipped to edge up by 0.1 % for a second consecutive month in May. The annual growth rate was a healthy 6.4 % in May.

·         Also on Tuesday, the Markit organisation releases “flash” readings for activity in manufacturing and services sectors in the US, Europe and Japan. In terms of the US readings, an easing in services sector activity is expected to be offset by a small lift in manufacturing activity.

·         On Wednesday weekly data on new mortgage applications are released, together with new home sales. Economists believe that new home sales may have fallen 2.8 % in June after surging by 6.7 % in May. Sales in the South, which accounts for the bulk of transactions, jumped to their highest level in 10½ years. 

·         On Thursday the influential Kansas Fed Manufacturing Index for July is released alongside a key measure on business investment – orders for ‘durable goods’. Durable goods are generally described as items with lifespans longer than three years – like cars and aircraft. And economists believe that orders may have risen by 2.5 % in June following a 0.4 % decline in May.

·         Also on Thursday the ‘advance’ June data on trade in goods is released. A deficit of US$64.9 billion was posted in May and the big trade deficits are ‘front of mind’ for investors given the Trump Administration’s tariff measures.

·         And on Friday the ‘advance’ reading on US economic growth in the June quarter is released alongside the June quarter Employment Cost index (ECI). Economists expect that the US economy grew at a bumper 4.0 % annual pace in the quarter after 2.0 % annualised growth in the March quarter. The included data on prices will be watched carefully together with the ECI, which is tipped to increase by 0.7 % in the June quarter.

·         Also on Friday, China is scheduled to release industrial profits for June. Total profits expanded slightly in May and annual growth was broadly stable. Revenue growth moderated on lower real sales growth in the industrial sector, despite higher producer prices.

Financial markets

·         The US company earnings season continues for the June quarter.

·         On Monday Alphabet, Kaiser Aluminium and Whirlpool report.

·         On Tuesday, 3M, AT&T, Biogen, Harley-Davidson, Lockheed, and Verizon Communications are amongst those reporting.

·         On Wednesday, Boeing, Coca-Cola, Facebook, Ford, Freeport-McMoRan & Qualcomm and Visa report.

·         On Thursday, earnings are due from Allergan, Amazon, American Airlines, ConocoPhillips, Intel and McDonald’s.

·         On Friday, Chevron, Colgate-Palmolive, Exxon Mobil, Merck and Weyerhaeuser are all scheduled to report.

 

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.

 

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