by Craig James

Commentary by some economists and journalists following the latest housing finance data can be best described as “unfortunate”. Certainly the comments were more knee-jerk rather than informed. Data showed the proportion of first home buyers taking out home loans in September was at record lows nationally. The perception was that first home buyers were being “forced out” of the market.

Certainly the proportion of first home buyers was at record lows in NSW and Victoria but it was also not far from record lows in the less-buoyant housing market of Queensland.

While the share of first home buyers in the Queensland has lifted modestly to 10.6 per cent in September from near record lows of 9.4 per cent in May, it still remains below the Australian average and below other states and territories.

Rather than being “forced out”, many young people moving out of home prefer to be renters rather than owners. Investors are putting their excess cash holdings to work in property and equities. And younger Gen Y, focussed on experiences, are occupying the new homes – frequently apartments close to cities rather than houses.

Similar trends are also occurring in the US where first time buyers are 25 per cent of the market, down from “normal” levels of around 40 per cent.



The week ahead

Investors and analysts can say ‘thank you, Reserve Bank’. Because if it wasn’t for the Reserve Bank the coming week would be dull on the economic front. In the US, a bevy of ‘top shelf’ economic releases are expected. And in China, the focus will be on the “flash” manufacturing gauge on Thursday.

In Australia, the week kicks off on Tuesday with minutes of the last Reserve Bank Board meeting. Given that the usual decision commentary was released following the meeting and then the Statement on Monetary Policy was released on the following Friday, there probably isn’t any more to be gleaned on Reserve Bank thinking. But investors and analysts will still pore over the Board minutes in an attempt to uncover new insights.

Also on Tuesday the Bureau of Statistics (ABS) releases regional data on the number and proportion of families (households) that are paying off a mortgage. The ABS will also release detailed data on trade in services across states for the last financial year.

On Wednesday, Guy Debelle, Assistant Governor (Financial Markets) at the Reserve Bank, will be a panel discussant at the Centre for International Finance and Regulation (CIFR) Forum on Perspectives on Financial Markets.

Also on Wednesday the ABS issues October data on imports of goods. This is one of the timeliest economic indicators, providing insights into business and personal spending. The ABS also issues the November edition of the “Australian Social Trends” publication.

On Thursday, Reserve Bank Governor, Glenn Stevens, delivers a speech: “The Australian Dollar: Thirty Years of Floating”. The speech is delivered to the Australian Business Economists Annual Dinner – more like the economists’ Christmas Party.

And on Friday the ABS issues the annual State Accounts for 2012/13, detailing “official” economic growth figures for states and territories over the financial year.

In the US, the week begins on Monday with data on net capital inflows and the National Association of Home Builders index. No change is expected in the builders’ activity index.

On Tuesday the usual weekly data on chain store sales is issued together with the employment cost index. A tame 0.5 per cent lift in employment costs is expected in the September quarter.

We could label Wednesday, “Super Wednesday” as no fewer than six indicators are expected. The indicators include minutes of the last Federal Reserve meeting, existing home sales, consumer prices and retail sales.

The core reading of consumer prices (excludes food and energy) is tipped to lift just 0.1 per cent in October, giving the Federal Reserve confidence to stay on the sidelines. Existing home sales are expected to have fallen by 0.8 per cent in October to a 5.25 million annual rate. And retail sales are believed to have lifted modestly in October – up 0.1 per cent, or up 0.2 per cent if auto sales are excluded.

On Thursday in the US the main measure of business inflation is released – the producer price index (PPI). Economists expect that the PPI fell by 0.1 per cent in October and only rose 0.1 per cent if food and energy is excluded. The usual weekly data on claims for unemployment insurance is also released on Thursday together with the influential Philadelphia Federal Reserve survey for November.

Also on Thursday, the Markit organisation will release mid-month or “flash” manufacturing indexes for China, European countries and the US.

Sharemarket, interest rates, currencies & commodities

Rewind six years to late October/early November 2007 and sharemarkets across the globe were at or near record highs. Then came the Global Financial Crisis, the European Debt Crisis and hesitant economic recoveries across the globe. Predictably sharemarkets spectacularly slumped in response to the GFC. On March 9 2009, the US Dow Jones was at 6,547, down 54 per cent from the October 9 2007 high of 14,164.

But just as spectacularly as it slumped, the Dow Jones spectacularly recovered, lifting 141 per cent in the 4½ years since hitting March 2009 lows.

The UK FTSE is around 3 per cent away from record highs; the German Dax has returned to record levels but the Australian and Japanese markets have more work to do to return to levels of late 2007. The Australian market rose too far in the China boom of 2007 although total returns are back at record highs.

Upcoming economic and financial market events

Australia

  • November 19 - Reserve Bank Board minutes - Minutes from meeting on November 5
  • November 20 - Speech by Reserve Bank official - Speech by Guy Debelle
  • November 20 - Imports of goods (October) - One of the timeliest economic releases
  • November 21 - Speech by Reserve Bank Governor - Speech on 30th anniversary of the floating of the Aussie dollar
  • November 22 - State accounts 2012/13 - Economic growth report card on last financial year

 
Overseas

  • November 18 - US Net capital flows (September) - Inflows and outflows of equities & bonds
  • November 20 - US Consumer prices (October) - A 0.1% lift in core inflation is expected
  • November 20 - US Retail sales (October) - A slight 0.2% lift in sales is expected
  • November 20 - US Existing home sales (October) - Economists tip a slight fall in sales
  • November 20 - US FOMC minutes - Minutes of last Federal Reserve survey
  • November 21 - Flash manufacturing survey - Covers the US, Europe and China
  • November 21 - US Producer prices (October) - Gauge of business inflation
  • November 21 - US Philadelphia Fed survey - Influential regional survey