The Experts

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

Craig James is CommSec’s Chief Economist.

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

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

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

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

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

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

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

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

The week ahead: Wages growth and US Federal Reserve

Friday, February 16, 2018

Australian wages growth is cruicial to the inflation and interest rate outlook

  • This week is all about wages growth in Australia. The December quarterly Wage Price Index is arguably the most important data released so far this year from an inflation and interest rate setting perspective. The semi-annual update on average weekly earnings will also be keenly observed.
  • The week kicks-off on Monday when the Australian Bureau of Statistics (ABS) issues the Overseas Arrivals and Departures publication that includes short and longer-term tourist and immigration data. Record numbers of Chinese tourists are holidaying in Australia, boosting spending in our retail and accommodation sectors.
  • On Tuesday the Reserve Bank releases the minutes of its February Board meeting. Few additional insights are expected following the release of the quarterly Statement of Monetary Policy on February 9. The Bank’s growth and inflation forecasts were left unchanged which means interest rates are on hold for some time.
  • Also on Tuesday the weekly ANZ-Roy Morgan weekly consumer sentiment results are released. And the Assistant Governor (Financial System) at the Reserve Bank, Michele Bullock, is scheduled to address the Responsible Lending and Borrowing Summit in Sydney.
  • On Wednesday the much-anticipated December quarter Wages Price Index is issued by the ABS. Wages growth has lifted off 20-year lows. We expect that wages rose by 0.6 per cent in the quarter, lifting annual growth from 2.0 per cent to 2.1 per cent. The labour market is tightening on strong jobs growth. Near decade-high business conditions and solid company profits are pre-conditions for pay rises. However, the Reserve Bank is only forecasting a gradual lift in wages: a “key uncertainty” for the inflation outlook.
  • Also on Wednesday construction work done for the December quarter is released by the ABS. Construction work surged by 15.7 per cent in the September quarter. Roads, rail and public transport infrastructure-related spending is booming, but residential dwelling construction may have eased.
  • We expect the Department of Jobs and Small Business’ Skilled Internet Job Vacancies Index to have risen for a fifteenth consecutive month in January when released on Wednesday. The index has risen to 5½-year highs as demand for skilled occupations improves across the economy.
  • The average weekly earnings data is released every six months. However the figures are important as they provide dollar estimates of wages in the economy across states and industries. The figures are issued by the ABS on Thursday.

Overseas: Focus on the US Federal Reserve

  • Data releases are light in a holiday-shortened week in the US. The main interest will be the minutes from the last US Federal Reserve policy meeting in January. Chinese property prices are scheduled to be released at the end of the week.
  • The President’s Day public holiday is observed in the US on Monday. Financial markets are closed. 
  • On Tuesday the usual weekly figures on US chain store sales – a measure of consumer spending – are released.
  • On Wednesday the US Federal Reserve issues the minutes of the January 30-31 meeting. Commentary on wages growth will be highly sought after by investors after the latest reading – the highest in over eight years – caused markets to reprice inflation expectations higher. US existing home sales have hovered near 10-month lows on record low supply. A modest increase from 5.57 to 5.6 million units is tipped in January.
  • Also on Wednesday the ‘flash’ Markit February manufacturing and services purchasing managers’ indexes are released in the US, Europe and Japan. Business activity remains expansionary amid a synchronised pick-up in global growth across developed economies.
  • On Thursday the Conference Board’s Leading Economic Index mat have risen for a fourth consecutive month in January. The index increased by 3.1 per cent in the second half of 2017 after rising by 2.6 per cent for the first half of the year. The underlying components of the index remain strong. The usual weekly data on claims for unemployment insurance (jobless claims) is also down on the Thursday data docket.
  • Also on Thursday US Federal Reserve voting member, Atlanta President, Raphael Bostic, gives a speech at the Banking Conference in Atlanta.
  • On Saturday attention turns to China with data on property prices to be released for the month of January. The housing market picked up in December as small declines in large cities stabilised and smaller cities gained some momentum, but price growth more than halved in 2017 as government curbs on speculation took effect.

Financial markets

  • The Australian corporate reporting season continues this week.
  • Amongst companies to report on Monday are Brambles, SEEK, NIB, Domain, Beach Energy and oOh!Media.
  • On Tuesday, earnings include those from Oil Search, Super Retail Group, Investa Office Fund and APN Outdoors.
  • On Wednesday, profit results include those from Coca-Cola Amatil, Scentre Group, Santos, Wesfarmers, Lendlease, Fortescue Metals, Downer and Stockland.
  • On Thursday results include: Alumina, CharterHall, Crown Resorts, Flight Centre, OceanaGold, OzMinerals, Qantas, Perpetual, Link Administration and Sirtex Medical. 
  • On Friday, earnings may include Westfield, Woolworths, Accent, Automotive Holdings, MYOB and Platinum Asset Management.

 

The week ahead: Reporting season week 2

Friday, February 09, 2018

Jobs report of main interest in Australia

  • The January job report together with estimates of business and consumer confidence are the key indicators in Australia in the coming week.
  • The week kicks-off on Monday with the Reserve Bank to release the December credit and debit card statistics. In November the average credit card balance rose by $65.90 to $3,127.70 – the largest monthly increase in 12 months. But in smoothed terms (12-month average) the average balance was down by 0.7 per cent.
  • On Tuesday the National Australia Bank releases its January monthly business survey. Business conditions are broadly the strongest in a decade and confidence is also improving. In fact the business confidence index rose from to +6.8 points to +11.1 points in December (long-term average +5.9 points).
  • Also on Tuesday the Australian Bureau of Statistics (ABS) releases data on lending finance – covering housing, personal, commercial and lease loans. In November total new lending commitments rose by 9.5 per cent – the biggest rise in almost three years and to a 12-month high.
  • The usual weekly ANZ-Roy Morgan weekly consumer sentiment results are also released on Tuesday. And the Assistant Governor (Economic) at the Reserve Bank, Luci Ellis, also is scheduled to address the Australian Business Economists forecasting conference.
  • On Wednesday Westpac and the Melbourne Institute release the monthly measure of consumer confidence. This survey is now more of a check on the weekly consumer sentiment surveys.
  • In January the Westpac/Melbourne Institute survey of consumer sentiment rose by 1.8 per cent to a 4-year high of 103.3. A reading above 100 denotes optimism.
  • On Thursday the January employment report is due for release. In December employment rose for a record-equalling 15th straight month, up by 34,700 after rising by 63,600 in November. But the jobless rate rose from 5.4 per cent to 5.5 per cent. We expect records to be broken in January with employment lifting by 30,000 while the jobless rate may be stable at 5.5 per cent.
  • On Friday Reserve Bank Governor Philip Lowe appears before the House of Representatives’ Standing Committee on Economics. An update on monetary policy and recent economic developments is expected.

Overseas: Key US inflation data to be released

  • The main interest in the US in the coming week is inflation data although retail sales, industrial production and housing starts will also compete for investor attention.
  • The week kicks off in the US on Monday with the monthly budget statement for January.
  • On Tuesday the usual weekly figures on chain store sales – a measure of consumer spending – are released.
  • On Wednesday in the US the focus will shift to the Consumer Price Index (CPI) and retail sales figures. Economists expect that the headline CPI rose 0.3 per cent in January, leaving the annual rate at 2.1 per cent. The core measure (excludes food and energy) may have lifted 0.2 per cent in the month and 1.8 per cent on the year – still a tame inflation rate.
  • US retail sales are seen posting a solid 0.4 per cent gain in February (or a 0.5 per cent gain if auto sales are excluded). Data on business inventories are also scheduled on Wednesday with the weekly data on mortgage finance.
  • On Thursday the Producer Price Index (PPI) – the main measure of business inflation – is released with industrial production data. Influential regional surveys – Empire State manufacturing and Philadelphia Federal Reserve survey – are also scheduled with capital flows and the NAHB housing sentiment index. The usual weekly data on claims for unemployment insurance (jobless claims) is also down on the Thursday data docket.
  • Economists tip a 0.3 per cent increase for the PPI and 0.2 per cent lift in the “core” measure. A firm 0.4 per cent rise in production is also forecast after the strong 0.9 per cent gain in December.
  • On Friday the University of Michigan reports the preliminary estimate of consumer sentiment for February. Data on import and export prices is also scheduled with housing starts. Import prices may have lifted 0.5 per cent with a weaker greenback with export prices up 0.3 per cent. Housing starts have been affected by harsh winter weather in recent months but may have lifted 1.5 per cent in January after December’s 8.2 per cent decline from near-decade highs.

Financial markets

  • The Australian corporate reporting season shifts into top gear in the coming week.
  • Amongst companies to report on Monday are Ansell, Aurizon, Bendigo & Adelaide Bank and JB Hi-Fi.
  • On Tuesday, earnings include those from Boral, Cochlear, SG Fleet, Propertylink and Transurban.
  • On Wednesday, profit results include those from CSL, Dexus, Goodman, IAG, Computershare, Ridley, Vicinity Centres, Villa World and Woodside Petroleum.
  • The biggest day of the season is Thursday. Results include: ASX, Evolution Mining, Healthscope, Sonic Healthcare, McGrath Holding, Newcrest Mining, Origin Energy, Suncorp, Telstra and URB Investment.
  • On Friday, earnings may include Medibank Private, Whitehaven Coal, iSelect, IOOF and Primary Health Care.

 

 

What's on: Reporting season and inflation

Friday, February 02, 2018

Australia:

  • The Reserve Bank Board’s first meeting of 2018 takes place, together with the release of its quarterly Statement on Monetary Policy. Retail and international trade are the key data releases along with the NAB’s quarterly business survey.
  • The week kicks-off on Monday with separate surveys by CommBank and the AiGroup on activity in the services sector.
  • Also released on Monday is data on job advertisements from ANZ. And the Federal Chamber of Automotive Industries releases January new vehicle sales data.  
  • The Reserve Bank Board meets on Tuesday for the first time this year. No change in monetary policy settings are expected. Interest rates are firmly on hold until at least the end of 2018 due to low inflation. Commentary on the strengthening Aussie dollar and wages growth will be keenly observed.
  • Also on Tuesday the monthly retail sales report for December is released. Consumers' spending plans appeared lacklustre in the lead-up to Christmas. Department stores Myer and David Jones both reported weak trading in the first half of the month. However, a solid lift in consumer sentiment through October-December suggest actual spending may have been better.
  • Australia recorded surprise back-to-back trade deficits in October-November on the back of strengthening imports. We expect a trade surplus of around A$300 million for December to be released on Tuesday. 
  • On Wednesday, AiGroup releases its construction industry survey. The index has expanded for 11 consecutive months.
  • On Thursday Reserve Bank Governor Philip Lowe speaks at the A50 Australian Economic Forum dinner in Sydney. Earlier, the NAB December quarter business survey is released.
  • On Friday the December data on home loans is released. Based on data from the Bankers Association, total home lending is expected to have fallen by 1.9 per cent during the month. Investor lending is tipped to decline by 1.0 per cent as restrictions from bank regulator, Australian Prudential Regulation Authority, continue to bite.
  • Also on Friday, the Reserve Bank releases its quarterly Statement on Monetary Policy. As well as being a comprehensive assessment of the state of the economy, the RBA also provides updated forecasts.

Overseas: China trade and inflation in focus

  • A busy week lies ahead on the Chinese economic calendar. The private sector services purchasing manager’s index, inflation and trade data are all issued. US trade, services survey and job openings data are released. 
  • The week kicks off in the US on Monday with the release of the ISM non-manufacturing (services) index for January. A reading of 56.3 points is forecast, a further moderation from the series record reading of 60.1 points in October. The Employment Trends report for January is also issued on Monday.
  • In China on Monday the Caixin services purchasing managers gauge is released. The survey is compiled from questionnaires sent to over 400 private services sector executives. The index rose to 3-year highs in December.
  • On Tuesday the US trade deficit is expected to have widened to US$51.7 billion in December, up from US$50.5 billion in November. Imports continue to outpace exports. The Department of Labor’s job openings and labour turnover survey is also released for December. Job openings unexpectedly fell in November to a six-month low. The usual weekly figures on chain store sales – a measure of consumer spending – rounds out the data releases.   
  • On Wednesday US consumer credit data is issued for December. The November reading of US$27.9 billion was the largest monthly expansion in lending to consumers since November 2001.
  • The weekly US data on new claims for unemployment insurance are set down for release on Thursday.
  • Attention then turns to China on Thursday. Annual exports growth slowed to 10.9 per cent in December, down from 11.5 per cent in November. And imports growth decelerated notably to 4.5 per cent from 17.6 per cent. Supply-side policy restraints impacted iron ore imports which declined by 9.9 per cent in December. 
  • US wholesale inventories and sales are due for release on Friday. The key takeaway from the November report was that the sales outpaced inventories by a sizeable margin, as wholesalers attempted to regain pricing power.
  • Also on Friday Chinese inflation data takes centre stage. Consumer prices are likely be higher in January due to higher food prices, reflecting both a very low base and the impact of harsh winter weather in some regions. The annual growth of producer prices decelerated to 4.9 per cent in December from 5.8 per cent in November. Easing factory prices and contained consumer prices should reduce pressure on China’s central bank to tighten policy rates in the near-term.

Financial markets

  • The Australian corporate reporting season continues in the coming week. Consensus forecasts are for 7 per cent earnings per share growth in 2017-18, after 12 per cent growth in 2016-17 – the highest in six years.
  • Key companies to report this week include: Magellan (Tuesday); CommBank and Rio Tinto (Wednesday); AGL Energy, AMP, Mirvac, carsales.com and Tabcorp (Thursday).

 

The week ahead: Inflation data in focus and US Fed meetup

Thursday, January 25, 2018

Australia:

  • Various price measures (measures of inflation) feature in Australia in the coming week. The highlight is the release of the Consumer Price Index on Wednesday.
  • The week begins on Monday with the release of the quarterly State of the States report from CommSec. The report tracks the economic performance of the states and territories.
  • On Tuesday the monthly NAB business survey weekly is released with the weekly ANZ-Roy Morgan Consumer Confidence survey. Both businesses and consumers are in good spirits and business activity is near the best in nine years.
  • On Wednesday, the Australian Bureau of Statistics (ABS) releases the December quarter Consumer Price Index (CPI) – the main inflation measure in Australia.
  • Overall we expect that the CPI rose by 0.7 per cent in the quarter, lifting the annual rate of inflation from 1.8 per cent to 1.9 per cent. However a key reason behind the lift in the annual growth rate is a sharp 10 per cent rise in the price of petrol.
  • On the other side of the equation, food deflation likely extended into the December quarter according to stock analysts.
  • However stripping out volatile elements, underlying inflation probably rose by 0.5 per cent in the quarter and 1.9 per cent over the year.
  • Also on Wednesday the Reserve Bank releases private sector credit figures.
  • On Thursday a raft of indicators is scheduled for release. The ABS releases data on dwelling approvals and export & import prices. There are manufacturing surveys from CommBank and AiGroup. And CoreLogic releases data on January home prices. Capital city prices may have fallen by 0.3 per cent.
  • And on Friday the ABS releases yet another set of price measures – this time the Producer Price Indexes or measures of business inflation.

Overseas:

  • A busy week lies ahead on the international economic calendar. In China, the purchasing manager’s index is issued. While in the US, the US Federal Reserve meets and the monthly jobs report dominates attention.
  • The week kicks off in the US on Monday with the release of the personal income & spending data. Incomes may have lifted 0.3 per cent in December with spending up 0.4 per cent. But investors will also be keen to see the result of the personal consumption price deflator (inflation measure). The core index (excludes food and energy) may have lifted 1.6 per cent over the year, still below the Federal Reserve’s preferred target of 2 per cent.
  • On Tuesday the Conference Board consumer confidence index is released with the S&P/Case Shiller measure of home prices. The usual weekly measure of chain store sales is also issued.
  • The US Federal Reserve also starts a two-day meeting on Tuesday (announcement at 6am Sydney time on Thursday morning). No change in rates is expected but investors will dissect the wording of the statement.
  • On Wednesday the ADP report on private sector payrolls is released with the employment cost index, Chicago purchasing managers survey and the pending home sales data. Private payrolls probably rose by 180,000 while employment costs may have lifted 0.6 per cent in the December quarter. Results in line with the forecasts will keep the Federal Reserve on track to lift rates in March. The usual weekly data on mortgage finance is also released on Wednesday.
  • The ISM manufacturing survey is released in the US on Thursday together with auto sales, construction spending, the Challenger survey of job layoffs and the labour cost/productivity estimates. The ISM index may have eased from 59.7 to around 59.0 in January but this is still well above a reading of 50.0 signifying expansion of the manufacturing sector. Weekly data on new claims for unemployment insurance is also issued on Thursday.
  • On Friday the January data on non-farm payrolls (employment) is issued in the US. Economists tip a 175,000 lift in jobs after the 148,000 increase in December. The jobless rate may have remained steady at 4.1 per cent. But the big question is whether the tight job market is leading to wage and price pressures. Average earnings are tipped to have risen by 0.3 per cent in January, lifting annual wage growth from 2.5 per cent to 2.6 per cent.
  • Data on factory orders and consumer sentiment are also released on Friday.
  • In China, the National Bureau of Statistics releases the purchasing manager survey results for manufacturing and services sectors on Wednesday. The private sector Caixin purchasing manager results for manufacturing are released on Thursday.

Financial markets:

  • The US corporate reporting season continues in the coming week. Amongst companies reporting on Tuesday are McDonalds, Advanced Micro Devices and Pfizer.
  • On Wednesday, Boeing, Microsoft, Facebook and AT&T are listed to release results. On Thursday, Amazon, Apple, Alphabet, ConocoPhillips, and Time Warner are listed to report. And on Friday earnings from Exxon Mobil, Chevron and Merck are due.

 

 

Business sales, job vacancies and US economic growth

Friday, January 19, 2018

Australia: Business sales, confidence, productivity & job vacancies

· The Australia Day public holiday is observed on Friday. With a shortened week, no ‘top shelf’ economic indicators are released. 

· The week begins on Monday with the release of Commonwealth Bank’s Business Sales index measuring economy-wide spending. 

· On Tuesday the weekly ANZ-Roy Morgan Consumer Confidence survey is issued. Sentiment has risen to 4-year highs in early 2018, consistent with a pick-up in retail spending, strong jobs growth and growing expectations for an extended period of interest rate stability. 

· On Wednesday, the Department of Jobs and Small Business releases its internet skilled job vacancies gauge. The index has risen for 13 consecutive months through to November and is up by 8.5 per cent from a year ago. The Reserve Bank has stated that it has observed emerging skilled shortages in industries such as information technology and construction as the labour market tightens. This is important for the wages growth outlook and inflation. 

· Also on Wednesday, the Bureau of Statistics (ABS) issues its estimates of labour and capital productivity for 2016-17. Labour productivity growth is a key determinant of improving Australian living standards. An increase in the ratio of capital to labour has supported modest productivity growth in recent years. 

· On Thursday the ABS releases detailed December estimates of the job market including geographical and demographic estimates.  

Overseas: US economic growth and housing data in focus along with Chinese business profits

· In the US, most interest will be in economic growth and housing data. In China, the industrial profits data will be issued.

· On Tuesday and Wednesday, keenly observed regional manufacturing activity gauges from the Chicago and Richmond Federal Reserve districts are released. 

· Also on Wednesday the Federal Housing Finance Agency (FHFA) home price index is released. The index is calculated using home sales price information from mortgages sold to, or guaranteed by, Fannie Mae and Freddie Mac. House prices were up 6.6 per cent in the year to October. 

· Data on existing home sales for December is released on Wednesday together with the usual weekly data on mortgage finance. Existing home sales are expected to have declined from near 11-year highs due to harsh winter weather. Also a chronic shortage of houses at the lower end of the market is keeping prices elevated and sidelining some first-time buyers. 

· Also on Wednesday Markit issues the keenly observed ‘flash’ manufacturing and services activity gauges for January. US factory activity is currently at its highest level since March 2015. Input price pressures have intensified with the rate of cost inflation accelerating on rising raw materials prices. The Conference Board's leading economic index has increased for 15 straight months and is also issued on Wednesday. 

· New home sales data is released on Thursday. Sales probably fell by 3.5 per cent, affected by the powerful blizzards that occurred in the month. 

· Weekly data on new claims for unemployment insurance is also issued on Thursday, together with wholesale sales/inventories. The US trade deficit is expected to narrow by US$1.2 billion to US$68.8 billion in December. 

· On Friday the first estimate of US economic growth for the December quarter is released. The annual growth rate is forecast to fall slightly to 3.0 per cent. Durable goods orders data for December are also released. The key takeaway from the report is that it will likely be a positive input for GDP since shipments of capital goods orders likely increased by 0.8 per cent on top of a 1.3 per cent increase in November.

· The focus then shifts to China on Friday. Profit growth at Chinese industrial firms slowed in November as producer prices softened. A further decline is expected in December with business inflation decelerating further.  

Financial markets

· The US corporate reporting season continues into a second week. 

· The fourth quarter of 2017 was the final quarter where corporations were subject to the 35 per cent corporate tax rate. And companies are expected to detail how the new Trump tax plan will impact expected margins. 

· Positive earnings results, together with tax reform and strong economic activity were some of the major reasons why Wall Street continued to breach record high levels in 2017.  

· According to Bespoke, the US stock market value measured by the Russell 3000 index crossed US$30 trillion for the first time last Friday and is now up more than US$6.5 trillion under President Donald Trump. The Russell 3000 represents about 98.5 percent of the total US market capitalisation.

· Netflix and Halliburton are among the key companies expected to release results on Monday. 

· Johnson & Johnson, Kimberly-Clark, Procter & Gamble, State Street, Texas Instruments and Verizon all report on Tuesday. 

· Ford and General Electric follow on Wednesday. 

· On Thursday earnings are expected from Caterpillar, Dow Chemical, Intel and Starbucks. And on Friday, Colgate and Honeywell report earnings.

 

Housing and employment data to dominate

Friday, January 12, 2018

A raft of key economic indicators are due for release in Australia in the coming week including measures of lending and consumer confidence as well the monthly job data.

The week kicks off on Tuesday. The Australian Bureau of Statistics (ABS) releases estimates of new vehicles sales while the weekly ANZ-Roy Morgan Australian Consumer Confidence survey is also issued.

Each month the ABS has provided seasonally adjusted and trend estimates of the industry data on new vehicle sales. But the December data will be the last that the ABS will provide. Given that car sales are an important component of household spending, it will be hoped that the Federal Chamber of Automotive Industries will continue to publicly provide the vehicle sales data in original (or unadjusted) terms at a state and national level.

On Wednesday the ABS releases the November data on housing finance and the September quarter building activity figures. Meanwhile Westpac and the Melbourne Institute issue the January consumer confidence survey results.

Home lending continues to rise and we are tipping a 1 per cent rise in the number of new finance commitments by owner-occupiers (people who are buying or building homes to live in).

Meanwhile the building activity data will provide the latest estimates on dwelling commencements (starts). And while the consumer confidence data is important, it is more of a check on the more regular weekly estimates of consumer sentiment.

On Thursday the December jobs data is released. It’s probably fair to say that the jobs data has proven surprisingly strong in recent months. Over the year to November, 383,300 jobs were created, the biggest annual gain for over 12 years. At the same time the unemployment rate stands at 5.4 per cent, a 4½-year low and down from 5.8 per cent at the end of 2016.

We expect that another 20,000 jobs were created in December with the jobless rate steady at 5.4 per cent.

Also on Thursday the Housing Industry Association releases new home sales data.

And on Friday the ABS issues comprehensive lending figures as well as the Overseas Arrivals and Departures publication that includes short and longer-term tourist and immigration data.

The lending data covers business, personal, housing and lease loans. And much of the interest in the arrivals and departures data are estimates of Chinese tourist numbers which continue to set new highs.

OVERSEAS: CHINESE ECONOMIC DATA IN FOCUS

In the US, most interest will be in production and housing data and the Federal Reserve’s Beige Book survey. In China, the December quarter economic growth data will be issued with the December economic activity figures.

After observance of the Martin Luther King Jr holiday on Monday, the first piece of US economic data is issued on Tuesday with the release of the influential Empire State manufacturing survey.

On Wednesday a raft of US economic data is scheduled for release. Industrial production figures are issued with the housing market index from the National Association of Home Builders (NAHB) and financial flows data.

Production may have lifted 0.4 per cent in December after a more modest 0.2 per cent increase in November. And the NAHB survey of home builder sentiment hit an 18-year high in December. So there will be interest whether there was some consolidation in the result in January.

Also on Wednesday the Federal Reserve produces the Beige Book – a summary of economic conditions across Federal Reserve districts. The survey will assist policymakers in their decision on rates at the January 30/31 meeting.

On Thursday the focus shifts to China. The December quarter estimate of economic growth is issued together with data on production, sales and investment for the December month. The Chinese economy continues to defy the gloomsters, expanding at a 6.8 per cent rate in the year to September.

In the US on Thursday the December estimate of housing starts is released while the influential Philadelphia Federal Reserve survey is also issued together with the regular weekly estimate of new claims for unemployment insurance. Housing starts rose 3.3 per cent in November while single-family starts jumped 5.3 per cent to a 10-year high.

And on Friday the focus shifts to the first estimate of consumer sentiment in the 2018 year.

FINANCIAL MARKETS

It is that time again when US companies release their quarterly earnings results – otherwise known as the profit-reporting season.

According to FactSet, S&P 500 companies (as a group) are expected to report a 10.5 per cent annual gain in earnings and 6.7 per cent lift in revenues. One complication is the recently-passed tax reform bill that will necessitate some companies reporting one-off charges to earnings or “special items”.

Amongst the companies expected to release results on Tuesday is Citigroup while Goldman Sachs, Bank of America, US Bancorp and Alcoa are amongst those slated to report on Wednesday.

On Thursday earnings are expected from Morgan Stanley, American Express, Atlassian and IBM.

And on Friday, seven companies are expected to report earnings including Schlumberger.

 

Investor signposts

Friday, December 15, 2017

By Craig James

 Australia: Holidays dominate 

 The seasonal slowdown in economic and financial events will be in evidence over the coming fortnight. There are few indicators that can truly be regarded as ‘top shelf’. 

 The fortnight kicks off on Monday with the Federal Treasurer expected to release the mid-year budget update: the Mid-Year Economic and Fiscal Outlook (MYEFO) report. On data available to October, the budget is tracking well, with the deficit around $3-4 billion better than expected due to higher revenues. However with the annual deficit near $31 billion, there is some work to do to return the budget to surplus. 

Also released on Monday is the Bureau of Statistics (ABS) estimate of new vehicle sales. Industry estimates already show that November sales were the highest for a November month. The ABS will provide seasonally adjusted and trend estimates of the vehicle sales figures. 

On Tuesday, the Reserve Bank releases minutes of the Board meeting held on December 5. The statement released to announce the interest rate decision on that day highlighted emerging skills shortages. Investors will be looking for further elaboration of the observation. 

The usual weekly measure of consumer sentiment from ANZ and Roy Morgan is also released on Tuesday. 

 On Wednesday, Commonwealth Bank issues the Business Sales Indicator – a measure of economy-wide spending that is derived from looking at credit and debit card transactions through the bank. 

 Also on Wednesday, the ABS releases its Finance and Wealth publication, a report that contains information on the household balance sheet. Despite all the hand-wringing, household balance sheets are strong with wealth at record highs. 

 The Finance and Wealth publication also includes other data such as foreign holdings of bonds and equities. 

On Thursday the ABS releases detailed November estimates of the job market. And the latest update includes the quarterly estimates of employment by industry. Healthcare is by far the leading employer in Australia. 

 And in the week after Christmas, there is a clear drying up of economic and financial events. The main indicator of interest is the Private Sector Credit data (or loans outstanding) from the Reserve Bank. Credit is up by 5.3 per cent on a year ago, below the near 6 per cent nominal growth of the Australian economy. 

Overseas. No rest for investors. 

 While economic data dries up in Australia, the same can’t be said for the United States with a raft of indicators scheduled over the coming fortnight. 

 In the US, the fortnight kicks off on Monday with the release of the National Association of Home Builders (NAHB) sentiment survey. And on Tuesday the November data on housing starts is released together with the September quarter current account figures. The usual weekly data on chain store sales is also released on Tuesday. 

On Wednesday in the US the data on existing home sales for November is released together with the usual weekly data on mortgage finance. 

 On Thursday the final estimate of US economic growth for the September quarter is released. Little change is expected from the preliminary estimate of 3.3 per cent annualised growth. The influential Philadelphia Federal Reserve survey is also released on Thursday with the Federal Housing Finance Agency (FHFA) measure of home prices and the weekly data on new claims for unemployment insurance. 

 On Friday in the US the November data on personal income and spending is released. And while the income and consumption data is interesting, it is inflation – the core personal consumption deflator – that attracts most interest, being the Federal Reserve’s preferred inflation measure. Inflation is contained at just an annual rate of just 1.4 per cent. 

 Also on Friday, data on consumer sentiment, new home sales and durable goods orders are released. 

 The highlights in the week between Christmas and New Year’s Day are the S&P/Case Shiller measure of home prices; consumer confidence and pending home sales (Tuesday); advance international trade (Thursday); and the Chicago purchasing managers index (Friday). 

In China, the November house price index is released on Monday (December 18) and industrial profits data on Wednesday December 27. 

Looking further out the “official” China National Bureau of Statistics purchasing manager survey results are issued on Sunday December 31. 

 

Investor signposts

Friday, December 08, 2017

By Craig James

Australia: Business survey & jobs in the frame

The highlight in the coming week is the monthly employment report. But there will be plenty of interest in the latest business survey and also the population figures.

The week kicks off on Tuesday with the Australian Bureau of Statistics (ABS) releasing the September quarter Residential Property Price indexes. While the data on home prices is somewhat dated, other figures are provided including those on the number of homes, permitting estimates on the number of people per home.

But the indicator that will attract the most attention on Tuesday is the National Australia Bank business survey. Business conditions are the best in the 20-year history of the survey. At the same time business confidence levels are good, no doubt given the strength in profitability.

Also to be released on a busy Tuesday is data on lending finance. This is the broader measure of new lending, including personal, business, lease and home loans. 

And the Reserve Bank also issues its own lending figures on Tuesday – data on credit and debit card lending. The average outstanding balance on credit cards across Australia is near 9½ year lows.

The usual weekly measure of consumer sentiment from ANZ and Roy Morgan is also released on Tuesday. 

On Wednesday, the monthly measure of consumer confidence is released from Westpac and the Melbourne Institute. The report is now primarily of interest as a check on the weekly survey. But each quarter there is a survey on the wisest places for new savings and this survey will be issued on Wednesday.

Also on Wednesday, the Reserve Bank Governor, Assistant Governor and Head of Payments Policy all deliver speeches.

On Thursday the ABS releases the November job report. In October employment rose for the 13th straight month, up by 3,700 in October. And the unemployment rate fell from 5.5 per cent to 5.4 per cent – the lowest jobless rate since February 2013. CommSec expects that jobs rose by 20,000 in November with the jobless rate stable at 5.4 per cent.

Also on Thursday, the ABS releases the latest population figures (September quarter) as well as the October data on tourist arrivals and departures. Population is growing at a 1.6 per cent annual rate. 

And in terms of tourism, China has now firmly displaced New Zealand as the largest source of tourists to Australia.

Overseas. US Federal Reserve to lift rates? Chinese monthly data.

 The key event in the coming week is the US Federal Reserve meeting. And close behind is the release of key monthly Chinese economic activity data.

 In the US, the week kicks off on Monday with the release of the Employment Trends report and the JOLTS job openings series. The October data showed that demand for jobs remained strong with job openings of 6.1 million, near record highs.

 On Tuesday the National Federation of Independent Business (NFIB) issues the November small business survey while the monthly Federal Budget figures are also released. But the key data is producer prices (business inflation). If the core measure (excludes food and energy) lifts 0.3 per cent as expected after October’s 0.4 per cent gain then investors will speculate whether inflation is making a comeback.

The usual weekly data on chain store sales is also released on Tuesday.

The Federal Reserve meets over Tuesday and Wednesday with a quarter percent rate hike expected to be delivered on 6am on Thursday morning Sydney time. And then the speculation will begin on when, and to what extent, the Federal Reserve will lift rates in 2018.

 On Wednesday in the US the consumer price index for November is released. The annual rate for the core measure is 1.8 per cent, still below the Federal Reserve’s favoured area of 2 per cent. And that isn’t expected to change with a 0.2 per cent lift in the monthly measure of prices.

The usual weekly data on mortgage finance is also issued on Wednesday.

 On Thursday the spotlight shifts to the monthly activity data for China, covering retail sales, production and investment. While overall economic growth appears to have has slowed modestly, retail sales is still growing at a 10 per cent annual pace – amazing for the second largest economy on the globe.

In the US on Thursday, November figures on retail sales are released together with export and import prices. Economists tip a 0.3 per cent lift in spending in November after October’s 0.2 per cent gain. Excluding new autos (vehicles) sales may posted a stronger 0.6 per cent increase in November.

 The usual weekly data on new claims for unemployment insurance in the US is also issued on Thursday.

 Also on Thursday the “flash” Markit manufacturing readings are released in the US, Europe and Japan.

 On Friday in the US data on industrial production is expected with the New York Federal Reserve manufacturing index and net capital flows data. Production posted a strong 0.9 per cent increase in November but this reflected the recovery from the impact of Hurricanes Harvey and Irma.

 

Investor signposts: Reserve Bank and economic growth

Friday, December 01, 2017

By Craig James

The week kicks off on Monday with the Australian Bureau of Statistics (ABS) releasing the September quarter Business Indicators publication, which includes data on profits, sales, inventories and wages. Solid profit growth has been achieved by Australian businesses over the past year. In the year to June, profits hit a record $304 billion, up by 20.9% on a year ago.

Also released on Monday is data on job advertisements from ANZ. While job seekers have more choices on where to look for work, online and newspaper job ads are still regarded as key leading indicators for the job market. Job ads are at 6-year highs.

The Reserve Bank Board meets on Tuesday for the final time this year. No change in monetary policy settings are expected. Interest rates are firmly on hold until at least the end of 2018 due to constrained inflation. Earlier, Assistant Governor (Business Services) Lindsay Boulton speaks at the High Security Printing Asia conference.

Also on Tuesday, the ABS issues the broader trade data for the September quarter – the balance of payments and foreign debt figures. The current account deficit widened to $9.6 billion in the June quarter which equates to around 2.1% of GDP, the lowest level since the mid-1970s.

Retailers have been successful in cutting costs, allowing prices to fall. But strong local and global competition is also serving to keep prices low. Retail trade data was flat in September after falls in the previous two months. Data on new vehicle sales and the weekly survey of consumer sentiment are also released on Tuesday.

Also on Tuesday, the ABS releases the government finance data. The spending figures (consumption and investment) are a key input into the following day’s economic growth estimates.

On Wednesday, the September quarter National Accounts are released. The main interest is in the economic growth figures (the change in GDP) but the data also includes other estimates such as household consumption. The economy probably grew by 0.5% in the quarter and 2.8% over the year.

On Thursday, the ABS releases international trade (exports and imports) for the month of October. Australia is now paying its way in the world with higher volumes of iron ore, coal and liquefied natural gas boosting exports together with increased foreign demand for Australia’s high quality agricultural products and services, such as education. In September, the trade surplus doubled to $1.75 billion, driven primarily by a surge in iron ore exports.

On Friday, the October data on home loans is released. Based on data from the Bankers Association, total lending for housing fell by 3.0% in the month. The value of loans for investors fell by 6.2% in September, with loans 13.1% below the most recent peak in January due to tighter lending restrictions.

Overseas: US employment and China inflation in focus

There are several data standouts in the US and Chinese economic calendar over the coming week. The US employment report and Chinese trade and inflation figures are of major interest.

In the US, the week kicks off on Monday with the release of the ISM New York index and data on factory and ‘final’ durable goods orders.

On Tuesday, the October US trade figures are released with the November ISM purchasing manager’s survey for the services sector. Economists expect that the ISM index fell to 59.3 in November from 60.1. Any reading above 50 indicates expansion of the services sector. Data on chain store sales will also be released.

On Wednesday, the private sector (ADP) employment report for November is released and 214,000 jobs are expected to have been generated over the month. Revised September quarter figures on labour costs and productivity in the US are also due.

On Thursday consumer credit data for October, Challenger data on job layoffs for November and the usual weekly data on jobless claims (new claims for unemployment insurance) are released.

On Friday, the keenly-awaited US employment (non-farm payrolls) report is released for November. The unemployment rate is tipped to stay near 16-year lows at 4.1/4.2% with a further 185,000 jobs forecast.

Also on Friday wholesale sales and inventories figures are scheduled for release, together with the preliminary reading of consumer confidence for December. Consumer confidence is at 17-year highs in the US.

Major November China indicators to watch include the private sector focused Caixin purchasing manager’s services survey (Monday), trade data (Friday) and inflation data – producer and consumer prices (Saturday).

Financial markets

The end of the year is fast approaching with a little over a month left of 2017. The ASX 200 is up by around 5.6% over 2017 so far with the All Ordinaries up 6.1%. But total returns on shares are up 10.5%, highlighting the importance of dividends.

The Aussie dollar started the year at its low point of US72.36 cents. The high point of US81.21 cents occurred in early September. The Aussie dollar is up around 5% in 2017.

And 90-day bills started 2017 at 1.82% with 2-year bonds at 1.91% and 10-year bonds at 2.77%. Currently 90-day bills are at 1.73% with 2-year bonds at 1.75% and 10-year bonds at 2.51%. The yield curve has flattened.

 

Housing and capital spending dominate last week of month

Friday, November 24, 2017

 By Craig James
 
In Australia, the month of November finishes with a raft of housing data releases. And a key focus for investors will be the private capital expenditure quarterly data which feeds into the Australian economic growth (GDP) report the following week.
 
The week kicks off on Tuesday when ANZ and Roy Morgan release the weekly survey of consumer sentiment. Recent data shows confidence has risen to 16-week highs due to an upswing on the views for current and future economic conditions.
 
On Thursday, the Housing Industry Association (HIA) releases its latest update on new home sales. Sales fell by 6.1 % in September led by a 16.7 % decline in apartments.
 
Also on Thursday building approvals data is released. Approvals rose by 1.5 % in September but are just 0.2 % higher over the year. While residential approvals are off the peak reached in mid‑2016, they remain at a high level. This suggests residential construction activity will remain firm.
 
On Thursday, the Bureau of Statistics (ABS) releases the “Private Capital Expenditure” survey for the September quarter. Non-mining investment lifted by 2.6 % in the June quarter. Record high readings for business conditions and profitability in recent NAB business surveys imply that non-mining business spending plans for equipment, plant and machinery will remain strong. Mining spending fell by 2.8 % in the June quarter. The decline in mining investment is nearing a bottom with just a few LNG projects still to be completed.
 
Also on Thursday, the Reserve Bank releases private sector credit data for October. Annual growth is 5.4 %, but is expected to slow due to a moderation in housing credit following a tightening in policy on interest-only loans and investor lending. Traders will be looking for signs of a pick-up in business credit which has lagged upbeat business outlook surveys.
 
On Friday, the Commonwealth Bank releases the manufacturing purchasing manager’s index for November. Australian manufacturing activity remains solid and expectations for future output are elevated.
 
Also on Friday, CoreLogic announces the monthly home price data for Australian cities and states. Auction clearance rates in Sydney have remained below 60 % since the last week of October, pointing to a softening in prices in Australia’s most populous city.
 
Elsewhere, Hobart’s attractive affordability is driving up home prices.
 
Overseas: US data deluge and China manufacturing activity in focus
 
The week commences in the US on Monday with the release of new home sales data for October. US housing supply is extremely lean, limiting more robust sales following hurricane impacts in the south of the country. Sales are forecast to decline to around 620,000 units in October from 667,000 units in September. The Dallas Federal Reserve also releases its October manufacturing activity gauge.
 
On Tuesday, “advance” data is expected to show that the US trade deficit widened from $64.1 billion in September to US$65.5 billion in October. The Conference Board measure of consumer confidence is also released on Tuesday and is tipped to remain near 17-year highs on upbeat attitudes towards the buoyant jobs market, pointing to potentially stronger consumer spending. The Richmond Federal Reserve survey is also due.
 
Also on Tuesday two prominent US home price measures are released for September. Both the Federal Housing Finance Agency (FHFA) and the S&P CoreLogic Case Shiller home price gauges should show US home price growth growing around a 6-7 % annual pace with home ownership vacancy rates at 16-year lows.
 
Wednesday is a busy day for economic news in the US with outgoing Federal Reserve Chair Janet Yellen testifying at the US Joint Economic Committee. Her speech will be keenly observed for clues on whether the central bank intends to lift interest rates at its December meeting, as widely expected by the market. The Fed’s Beige Book detailing national economic activity is also released on Wednesday.
 
Also on Wednesday the second estimate of US economic growth for the September quarter is tipped to show that GDP expanded at a 3.2 % annual rate, up from 3.0 % in the first estimate.
 
On Thursday US personal income and spending data is released containing the Federal Reserve’s preferred measure of inflation – the core personal consumption expenditure (PCE) deflator. Economists expect a moderate 0.2 % rise in October, keeping annual inflation well below the Fed’s 2 % inflation target.
 
On Thursday attention turns to China with the November manufacturing and services purchasing managers indexes from the National Bureau of Statistics. After reaching 5-year highs, manufacturing activity has moderated in response to a policy clampdown on pollution and property speculation. The private sector focused Caixin gauge on manufacturing is released the following day on Friday. 
 
Also on Friday the ISM releases the US manufacturing purchasing manager survey results for November. In October activity eased modestly, but from 13½-year highs. Also data on construction spending and new auto sales are released on Friday.
 
Financial markets
 
The US Senate is expected to vote on President Trump’s tax bill during the coming week after the House of Representatives approved the package. Tax cuts have effectively been “priced in” and since the US election on November 8 last year, the US S&P500 Index has increased by over 21 %.
 
According to Factset data, in the past year there have been nearly three times as many weeks with market gains above one percent as those weeks with losses of one percent or more. This makes it one of the most profitable markets to have invested in for some time. Overall, the “Trump Rally” is the fifth strongest post-presidential election equities rally since 1950. The “Clinton Rally” of 31.7 % from November 5 1996 remains in first place.

 

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