by Craig James

Data on tourist arrivals and departures is released on Monday. It may seem surprising but tourist arrivals are holding at all-time record highs in smoothed terms, and just shy of record highs in seasonally adjusted terms. This is despite the strength of the Australian dollar over the past year. Certainly departures have lifted even further in over the past year as Aussie tourists embrace cheaper overseas travel, but in recent months the trend in departures has been more sideways rather than higher.

Apart from the impact on airlines and airports, we need to think of these “people flows” more broadly. If more tourists are coming to our shores, then this benefits a range of retail, transport and hospitality businesses in tourist regions. But some of the impact will be offset by Aussies taking their dollars overseas rather than holidaying locally. Clearly some regions have been more affected than others from the tourism trends. Interestingly with the Australian dollar depreciating by almost 10 per cent in the past three months it is likely to increase the attractiveness of Australia as a tourist destination and also more Australians may travel interstate rather than overseas.

And the tourist arrivals/departures data also includes more longer-term population trends. Interestingly Australia’s population growth rate and migration levels are holding near 4-year highs. Certainly planned and sustainable increases in population and migration are very much in Australia’s interest. What isn’t in our interests is if stronger population growth is not planned.

The week ahead

There is a reasonably full schedule of economic data releases in Australia over the coming week covering lending, the job market, consumer sentiment and car sales. “Top shelf” economic data also returns to the US with inflation, production and retail spending on the agenda.

In Australia the week kicks off on Monday with a plethora of new economic figures. ANZ releases data on job advertisements; the Reserve Bank issues data on credit card lending; and the Bureau of Statistics (ABS) releases figures on tourist arrivals and housing finance.

Overall a mixed bag of results is likely. We expect that the data will show job ads were flat while the value of housing finance loans rose by 4 per cent in November; and tourist arrivals and departures probably lifted modestly in November.

In large part the data for November is ancient history. Anecdotally the Australia economy seems to have lifted a gear over December, which has continued early into the New Year, both in Australia and overseas. Diminishing risks to the global economy certainly points to better times ahead.

On Wednesday there is another data deluge. Westpac and the Melbourne Institute release the latest report on consumer sentiment. In addition, the ABS issues seasonally adjusted data on car sales together with lending finance figures and figures on engineering construction.

The pick of the data is consumer sentiment. The report should confirmation that confidence levels have tracked higher. Consumers certainly have more reason to be optimistic given, warmer weather, rising house prices and recent sharemarket gains – all supporting a lift in sentiment.

And on Thursday the ABS will issue the December report on the job market coupled with the monthly inflation gauge issued by TD Securities. We expect that the data will show inflation is contained, while employment rose by around 11,000 in the month, while the participation rate (those in jobs or looking for work) was probably unchanged, leaving the unemployment rate at 5.8 per cent.

It is fair to say that the job market has remained surprisingly resilient over the past year despite the sluggishness in the broader economy. Smart businesses have held on to staff while others, especially across construction, agriculture, medical and the finance sector. A lot of business have found it hard to attract and retain quality workers. Now that activity levels are lifting, it is likely that businesses will once again start focusing on upgrading investment plans. Unfortunately it does take a good six months to translate through to a pickup in hiring plans and employment.

In the US the retail sales report kicks off proceedings on Tuesday alongside business inventories and the import price index. Economists tip a solid 0.4 per cent lift in sales (excluding auto sales, gasoline and building). Anecdotally US retailers have been a lot more upbeat about Christmas and Black Friday sales compared with prior years.

On Wednesday, data on producer prices and the Empire State index survey is released together with the Federal Reserve’s Beige Book – a detailed look at conditions across 12 Federal Reserve districts. Business inflation remains well contained. In fact core producer prices (excluding food and energy) are expected to lift by just 1.3 per cent over the year. The Empire State survey should show a healthy lift in business conditions across New York manufacturing firms.

On Thursday, the December data on consumer prices is issued alongside the weekly data on claims for unemployment insurance and influential Philadelphia Federal Reserve index. Jobless claims have shown a consistent fall in recent times - suggesting the labour market continues to steadily improve. Annual inflation data is expected to lift by 0.3 per cent in December to hold around 1.3 per cent higher over the year. Ensuring the US Federal Reserve remains comfortable that its stimulus program is not resulting in an uncomfortable lift in inflation.

And on Friday, the focus is squarely on the housing sector, with building permits and housing starts slated for release, alongside industrial production figures and the first survey of US consumer confidence in 2014. Economists expect that a mixed bag, with the cold weather likely to result in housing starts falling by 8.8 per cent, building permits marginally weaker, while production is tipped to lift 0.2 per cent in the month.

Sharemarket, interest rates, currencies & commodities

Given the sharp rally in US equities over the past few months, it is hardly a surprise that US investors are certainly optimistic about the upcoming profit-reporting or earnings season. A survey by Thomson Reuters found that quarterly profits are tipped to lift by 7.6 per cent on a year ago.

Alcoa will be the first cab of the rank on Thursday Jan 9. However the earnings season kicks up a gear in the coming week with an array of blue chip companies reporting. Earnings are expected to include those from JP Morgan Chase and Wells Fargo (Tuesday); Bank of America (Wednesday), Goldman Sachs, American Express, Citigroup, Capital One and Intel (Thursday); American Express, Citigroup, Capital One and Intel (Thursday); and General Electric, SunTrust and Morgan Stanley (Friday).

Upcoming economic and financial market events

Australia

  • January 13 - Housing finance (November) - The value of loans may have lifted 4 per cent
  • January 13 - Job advertisements (December) - Businesses have been reluctant to hire staff
  • January 15 - Consumer sentiment (January) - Consumers have been decidedly more optimistic in recent months
  • January 15 - New car sales (November) - Car sales have been healthy in recent months
  • January 15 - Lending finance (November) - Covers housing, personal, lease and business loans
  • January 16 - Inflation gauge (December) - Inflationary pressures are contained
  • January 16 - Employment & unemployment (Dec) - Unemployment expected to hold steady around 5.8 per cent

 
Overseas

  • January 14 - US Retail sales (December) - Excluding cars and gasoline, a firm 0.4 per cent increase is tipped
  • January 15 - US Empire Manufacturing Index (Nov) - Covers manufacturing conditions across the New York region
  • January 15 - US Producer prices (December) - Core prices (excludes food and energy) are up 1.3% over the year
  • January 15 - US Fed Beige Book - Covers conditions across Federal Reserve districts
  • January 16 - US Consumer prices (December) - Core prices are up 1.7 per cent over the year
  • January 17 - US Industrial production (December) - A 0.3 per cent rise in production is tipped
  • January 17 - US Housing starts (December) - Economists tip a 8.8 per cent fall in starts