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: Australian arrivals and departures

Friday, June 15, 2018

Australia: Jobs, business and consumer surveys dominate

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

Overseas: US housing data dominates

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

Financial markets

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

 

The week ahead: The US Fed takes centre stage

Friday, June 08, 2018

Australia: Jobs, business and consumer surveys dominate

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

Overseas: The US Federal Reserve takes centre stage

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

 

 

The week ahead: Winter is here

Friday, June 01, 2018

 

Australia: "Winter Whirlwind"

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

Overseas: Quiet week in the US

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

 

The week ahead: Heavyweight US economic growth

Friday, May 25, 2018

 

Australia: Business investment and home prices in focus

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

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

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

 

The week ahead: Consumer confidence and US housing

Friday, May 18, 2018

Australia: Quiet times

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

Overseas: US housing in focus

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

Financial markets

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

 

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

Friday, May 11, 2018

 

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

 

 

 

Overseas: China monthly activity data dominates 

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

 

 

 

The Week Ahead: The Budget and Inflation

Friday, May 04, 2018

Australia: Budget time again

  • In Australia over the coming week, the handing down of the Federal Budget dominates. Overseas, the interest is in the latest inflation estimates in both China and the US.
  • The week kicks off on Monday with the release of the National Australia Bank business survey. In March the NAB business conditions index fell to +14.1 points from a downwardly-revised reading of +20 points in February (third highest reading on record). The business confidence index also fell to +7.4 points in March from a downwardly-revised reading of +9.1 points.
  • There are good reasons to expect that business conditions and confidence remain firm in April. Also investors will look for any signs of emerging wage or price pressures.
  • Also on Monday, ANZ releases the data on job advertisements for April. Hiring looks to have flattened. Job ads were broadly unchanged in March after falling 0.4 per cent in February.
  • On Tuesday the weekly Roy Morgan-ANZ consumer sentiment survey is released together with the latest retail spending figures from the Bureau of Statistics.
  • Consumers are cautiously optimistic and are spending a little more freely, in part by reducing lofty savings levels.
  • Retail trade may have lifted 0.3 per cent in March while over the March quarter a solid 1.3 per cent lift in spending is expected in inflation-adjusted terms. It needs to be remembered that retail trade only accounts for 30 per cent of broader household spending with services dominating.
  • Also on Tuesday the Federal Budget is handed down at 7.30pm AEST. The Federal Budget is seen as a once-a-year event. But in reality the government’s finances can be tracked over time.
  • Decisions can be made over time, rather than on the second Tuesday in May. While it is useful to have a stocktake at a point in time, most families and businesses know that budgets need to be managed and tracked over time.
  • As the Treasurer indicated this week, the government’s finances are better than expected – in fact around $7 billion better than expected. That is because consumers are indeed spending, people are getting jobs, the global economy is stronger and companies are operating efficiently.
  • Based on leaks, announcements and speculation so far, the budget will be focused on tax cuts and infrastructure spending.
  • On Friday, data on home loans (housing finance) is released. Demand for loans has softened in line with softening home prices. In fact the number of loans for owner occupiers has fallen in five of the last six months. But based on data from the Bankers Association, the number of loans may have lifted by a healthy 2.5 per cent during March.

Overseas: Inflation & trade data in focus

  • Inflation readings dominate in China and the US in the coming week. The other point of interest is Chinese trade figures, especially given the current stoush on trade issues with the US.
  • The week kicks off in China on Tuesday when April data on exports and imports (international trade) is issued. In March, China recorded a rate trade deficit of US$4.98 billion.
  • In the US on Tuesday, consumer credit data is released – a key measure of borrowing by US consumers. Economists expect that lending lifted by US$14.3 billion in March after a US$10.6 billion lift in February.
  • Also on Tuesday, a measure of small business sentiment – the NFIB business optimism index – is released. In February the index hit the second highest reading in the 45 years history of the survey. But after falling from 107.6 to 104.7 in March, a lift to 106.7 in April is expected.
  • The regular weekly data on US chain store sales will also be issued on Tuesday while mortgage finance data is on Wednesday and new claims for unemployment insurance on Thursday.
  • On Wednesday in the US, data on producer prices is expected while data on consumer prices is issued on Thursday. The core measure of producer prices (excludes food and energy) stands at a 2.7 per cent annual rate while the core consumer price index is up 2.1 per cent over the year.
  • On Thursday in China, data on consumer and producer prices is released. The annual growth of consumer prices may have eased from 2.1 per cent to 2 per cent in April with producer prices down from 3.1 per cent to 2.9 per cent.
  • On Friday in China data on money supply, new yuan loans and outstanding loans is expected.
  • Also on Friday, US data on export and import prices is released together with the monthly budget statement. If inflation is to start creeping higher, a key driver could be imported raw material costs including oil. At present, import prices are 3.6 per cent higher than a year ago.
  • The regular survey of consumer sentiment from the University of Michigan is also released on Friday.

Financial markets

  • Westpac releases its half-year results on Monday May 7.

 

 

 

The week ahead: Reserve Bank in focus and US Fed meets

Friday, April 27, 2018

 

Australia: Reserve Bank in focus

  • In Australia over the coming week, the Reserve Bank takes centre-stage. The Board meeting on Tuesday is followed by a dinner in Adelaide with a speech from Governor Philip Lowe scheduled. On Friday the Bank releases its quarterly statement on monetary policy.
  • The week kicks off 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.
  • Also on Monday the Reserve Bank issues the March Financial Aggregates publication. Private sector credit (effectively outstanding loans) rose by 0.4 per cent in February after a 0.3 per cent rise in January. Annual credit growth held at a 3½-year low of 4.9 per cent. M3 money supply rose by 3.8 per cent over the year, the slowest growth in 25 years. Data on new home sales is also expected on Monday.
  • On Tuesday data on home prices, the weekly Roy Morgan-ANZ consumer sentiment survey and surveys on the manufacturing sector are all released in a hectic start to the month.
  • Also on Tuesday the Reserve Bank Board meets but no change in the neutral monetary policy stance is expected. Interest rates are firmly on hold until at least year-end due to retail deflation and modest wages growth. Governor Philip Lowe is scheduled to speak at the Board’s dinner in Adelaide.
  • On Thursday, local council building approvals data for March is issued. Residential building approvals fell by 6.2 per cent in February, led lower by volatile apartment approvals which declined by 16.4 per cent. However, detached house approvals rose by 1.9 per cent. Surveys on the services sector for the month of April are also issued by both the CBA and AiGroup.
  • Also on Thursday Australia’s international trade data for March is released. A healthy $825 million surplus was recorded in February, continuing a solid run of results since late 2016.
  • On Friday, new vehicle sales data is issued. Australia’s new vehicle market grew 2.5 per cent to a record-high 1.2 million units over the year to March. 
  • 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 Board also provides updated forecasts.

Overseas: US Federal Reserve meets and US employment report headlines data releases

  • All eyes will be on the US Federal Reserve policy meeting on Wednesday. The employment report rounds out a busy week of data releases in the US. Monthly manufacturing and services activity gauges are due in China. 
  • The week kicks off in China on Monday when the National Bureau of Statistics issues the purchasing managers’ surveys for April. Activity picked-up in March as businesses returned to work following the Lunar New Year.
  • In the US on Monday the personal income and spending report is released. The US Federal Reserve’s preferred measure of inflation – the personal consumption expenditure deflator – will be keenly observed. The deflator has been static around 1.5-1.6 per cent since September, but an increase to 1.8 per cent is expected in March.
  • Also on Monday US pending home sales are tipped to lift by 0.6 per cent in April following a 3.1 per cent increase in March. Regional manufacturing surveys from the Chicago and Dallas Federal Reserve are issued.
  • On Tuesday US manufacturing surveys are released by Markit and the ISM. According to ISM, new orders, output and employment rose at a softer pace in March, decelerating from 14-year highs in February.
  • On Wednesday the Chinese private sector Caixin purchasing manager’s index for manufacturing is released.
  • Also on Wednesday the US Federal Reserve announces its all-important interest rate decision. No change in interest rates are expected following last month’s increase. Policymakers have an optimistic view that the US economy is strengthening, the labour market is tightening and inflation will gradually rise over the coming months. The ADP survey is expected to show that private sector companies hired a further 200,000 job seekers in April.
  • On Thursday the US ISM services sector survey is issued with factory orders and trade. US factory orders are expected to have increased by 0.9 per cent in March after rising by 1.2 per cent in February. A trade deficit of US$56.7 billion is forecast in March – near 9-year highs. Imports continue to increase on strong demand.
  • On Friday China’s private sector services sector activity gauge is issued by Caixin.
  • Also on Friday the US jobs report for April is released. The unemployment rate is forecast to fall to 4.0 per cent while the data should show an additional 195,000 jobs were created in the month.

Financial markets

  • The ‘Big Four’ Australian banks start reporting their first half-year 2018 earnings this week. Consensus earnings downgrades are expected on the back of increasing margin pressures from rising short-term funding costs and headwinds from regulatory reviews.
  • ANZ kicks-off the results on Tuesday. Investor focus is likely to be on ‘stranded’ costs and guidance on additional capital management plans.
  • National Australia Bank reports its earnings on Thursday. Progress on its restructuring and medium-term expense savings will be the key focal points.
  • On Friday the composition of Macquarie Group’s earnings, specifically the balance between performance fees, trading and net interest income will be keenly observed.

 

The week ahead: Inflation and US economic growth

Friday, April 20, 2018

Australia: Inflation in the spotlight

  • In Australia in the coming week, readings on inflation dominate. In the US there is a broad range of indicators to be released including economic growth.
  • The week kicks off on Tuesday when the Bureau of Statistics (ABS) releases the March quarter Consumer Price Index – the main measure of inflation in Australia. The annual rate of inflation has only been in the Reserve Bank’s 2-3 per cent target band for one quarter in the past three years. And we expect that low inflation prevailed in the March quarter.
  • Overall we expect that both headline and “underlying” measures of inflation rose by 0.5 per cent in the March quarter to be up 2 per cent over the year. Seasonal increases in education fees, pharmaceutical products and domestic travel are expected, offset by seasonal falls in international travel. Some product prices may have been affected by post-Christmas sales. And petrol prices may have lifted by less than 1 per cent.
  • Inflation results in line with forecasts will reduce the odds of the Reserve Bank lifting interest rates in 2018.
  • Also on Tuesday the weekly gauge of consumer confidence is issued by ANZ and Roy Morgan. And the Reserve Bank Assistant Governor Christopher Kent delivers a speech at a Housing Industry Association breakfast.
  • After the ANZAC Day observance on Wednesday, investors will focus on export and import prices when they return to work on Thursday.
  • Export prices will be constrained by lower coal and iron ore prices, although offset by higher oil prices. Import prices will be boosted by the higher oil prices. The Aussie dollar also fell only 1.7 per cent over the quarter.
  • On Friday the ABS releases the Producer Price Indexes – measures that will provide a guide on inflation across the business sector. In the December quarter, the ‘final demand’ measure was up 0.6 per cent to stand 1.7 per cent higher over the year. Investors will closely watch building construction prices in light of anecdotes noting high demand for labour and rising wages. The 7.5 per cent lift in oil prices will serve to boost petroleum refining and petroleum fuel manufacturing costs.

Overseas: US economic growth & housing in focus

  • 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 3 per cent rise in February, economists are tipping a 0.2 per cent lift in sales in March. A lack of stock on the market is constraining sales but boosting prices.
  • Also on Monday, 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 manufacturing activity is expected to be balanced by higher service sector activity.
  • On Tuesday, new home sales data is scheduled in the US, together with consumer confidence, home prices and the influential Richmond Federal Reserve survey.
  • Economists believe that new home sales may have lifted 1.9 per cent in March after the 0.6 per cent fall in February to 4-month lows. Sales have fallen for the last three months. The stock of homes stands at 9-year highs, representing a supply of 5.9 months at the current sales rate.
  • Also on Tuesday economists expect that consumer confidence eased again, down from 127.7 in March to 125 in April. Back in February, confidence was at 18-year highs. And home prices may have risen 0.3 per cent in February, trimming the annual rate from 6.4 per cent to 6.2 per cent.
  • Also on Tuesday the regular weekly data on chain store sales in released in the US while on Wednesday, weekly data on new mortgage applications are released.
  • On Thursday a key measure on business investment – orders for ‘durable goods’ – is released. Durable goods are generally described as items with lifespans longer than three years – like cars and aircraft. Orders have risen in three of the past four months. And economists believe that orders may have risen by 1.0 per cent in March.
  • Also on Thursday the ‘advance’ March data on trade in goods is released. A deficit of US$75.4 billion was posted in February and the big deficits are clearly in the sights of the US President currently.
  • And on Friday the ‘advance’ reading on US economic growth in the March quarter is released alongside the March quarter employment cost index (ECI). Economists expect that the US economy grew at a 2.3 per cent annual pace in the quarter after 2.9 per cent annualised growth in the final quarter of 2017. The included data on prices will be watched carefully together with the ECI. The ECI has been averaging growth of around 0.6 per cent a quarter or around 2.5 per cent over the year.

Financial markets

  • US earnings season continues. Amongst companies reporting earnings on Monday are Halliburton, Kimberly-Clark, Alphabet (Google) and Barrick Gold.
  • On Tuesday, 3M, Caterpillar, Coca-Cola, Corning and Texas Instruments are amongst those reporting.
  • On Wednesday, AT&T, Boeing, Comcast, Facebook, Ford, Twitter and Visa report.
  • On Thursday, earnings are due from Amazon, ConocoPhillips, Domino’s Pizza, General Motor, Microsoft and ResMed.
  • On Friday, Exxon Mobil and Chevron report.

 

The week ahead: Can the Aussie labor market continue its record-breaking run?

Friday, April 13, 2018

·         A quiet week is in prospect on the data front in Australia. The Reserve Bank releases the minutes of its April Board meeting. But the main focus will be on whether the Aussie labour market can continue its record-breaking run of monthly job gains. 

·         On Monday the Bureau of Statistics (ABS) releases lending finance data. The total value of new lending commitments (housing, personal, commercial and lease finance) rose by 0.5 per cent in January to $71.5 billion, up from US$71.1 billion in December. Commitments are up by 6.1 per cent on a year ago.

·         On Tuesday the weekly gauge of consumer confidence is issued by ANZ and Roy Morgan.

·         Also on Tuesday the Reserve Bank releases minutes of its April Board meeting. Commentary on wages growth, share market volatility, trade protection and household consumption could be of particular interest to market participants. We don’t expect any significant change in the Bank’s view on the inflation and economic growth outlook for Australia. Interest rates are firmly on hold. 

·         On Wednesday, the ABS releases the “Overseas Arrivals and Departures” publication. The publication includes data on tourist flows as well longer-term migration data. Tourist arrivals rose by 2.4 per cent to a record-high 760,200 during the month of January. Arrivals increased by 5.7 per cent over the year. Departures increased by 2.2 per cent to a monthly record-high 894,100 in January. Departures were up by 2.6 per cent on a year ago.

·         Also on Wednesday the Department of Jobs and Small Business releases its internet vacancy index. The index has now risen for 16 consecutive months – the longest period of growth since March 2011. The index has increased by 10.5 per cent over the year to 5½-year highs in February.

·         On Thursday the ABS issues the March employment report. Jobs rose for a record-breaking 17th straight month in February. The unemployment rate edged-up to 5.6 per cent due to an increase in the participation rate to a near 7-year high of 65.7 per cent. The strengthening job market has encouraged people back into the workforce, to look for a job or to work more hours. The underemployment rate is 8.4 per cent, implying that there is still some slack in the labour market. Economists tip an increase in total jobs of around 25,000 during the month.

·         On Friday the CommBank Business Sales Indicator (BSI), a measure of economy-wide spending, is released for March. The BSI rose by 1.0 per cent in trend terms in February - the strongest pace of growth in four years.

Overseas: Chinese economic health check 

·         In China, indicators such as economic growth, retail sales, investment, production and house prices are all issued.  Output is expected to remain solid, despite seasonal volatility caused by the Lunar New Year holiday period.  

·         The week kicks off on Monday in the US with data on retail sales, the National Association of Home Builders (NAHB) index and the New York State Empire manufacturing survey. 

·         Attention will turn to China on Tuesday. The all-important March quarter economic growth (GDP) will capture the most headlines. The Chinese leadership continues to target ‘sustainable’ and ‘quality’ growth outcomes as it tilts output towards the consumer. Economists forecast an annual growth rate of 6.8 per cent with activity supported by the industrial sector. The technology and financial sectors may have contributed less this quarter. Retail sales annual growth of near 10 per cent is tipped.

·         On Tuesday US housing data is released. Starts and permits were weaker-than-expected in February, yet the underlying increase in single-family starts and the uptick in the number of units under construction provided optimism.

·         Also on Tuesday economists expect that production rose a further 0.4 per cent in March. Capacity utilisation is at the highest level in three years, implying potential increases in input costs. All at a time when higher tariffs are proposed, potentially boosting inflation.

·         On Wednesday, the US Federal Reserve re-takes centre stage. The most recent Beige Book – a national survey – cited that “most [US} districts saw employers raise wages and expand benefit packages in response to tight labour market conditions”. Federal Reserve Vice Chair for Supervision, Randal Quarles, testifies before the US Senate Banking Committee. 

·         Also on Wednesday the National Bureau of Statistics issues China’s 70-city housing price data for March. House price growth decelerated to 5.2 per cent in February, continuing the decline from a peak of 12.6 per cent in November 2016. Policymakers have announced stricter property-buying controls in an effort to cool prices. In tier-1 cities, housing prices fell on an annual basis in January for the first time since May 2015.

·         On Thursday the influential Philadelphia Federal Reserve manufacturing gauge is released for March. In February, 64 per cent of firms reported labour shortages, while 70 per cent of firms highlighted skills mismatches between business requirements and available labour.

·         Also on Thursday the Conference Board's Leading Economic index is issued for March. The index increased by 0.6 per cent in February. The index is tipped to rise by 0.4 per cent in March.

 

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