By Craig James

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

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

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

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

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

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

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

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

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

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

US Federal Reserve to decide rate settings

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

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

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

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

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

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

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

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

Sharemarket, interest rates, currencies and commodities

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

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