By Craig James

Inflation dominates the local calendar

In Australia, the week kicks off on Monday when CommSec releases its State of the States report. NSW led this quarterly assessment of economic performance in the April report. The question is whether NSW retained top spot in the latest July report.

On Tuesday the Reserve Bank releases minutes of the last Board meeting, held on July 7. At this meeting Reserve Bank Board members elected to both leave interest rate settings unchanged as well as the monetary policy stance. The RBA has a “neutral” stance, meaning that the next move in rates could go either way.

Clearly, however, if rates were to move in the next six months, it would be most likely be down. But if the economy continues to stabilise, the longer that rates stay unchanged, the greater the chance that the next move in rates is up – but not until well into 2016.

Also on Tuesday, Roy Morgan and ANZ release their weekly reading on consumer confidence. Over the last two weeks consumer confidence has slumped 8% from 18-month highs. In short, whatever could have gone wrong over that period did go wrong. But if Greece and Iran retreat from the headlines and both the Aussie dollar and iron ore prices stabilise, then confidence may rebound just as smartly.

On Wednesday, the Bureau of Statistics (ABS) releases the quarterly inflation data, that is, the Consumer Price Index. The big mover over the last quarter has been the price of petrol. Using our daily national estimates of petrol prices, CommSec has calculated that petrol lifted around 14% in the June quarter, putting it on track to the largest quarterly increase in 25 years.

Overall the CBA Group expects that the headline CPI rose by 0.9% in the quarter with annual growth at 1.7%. Stripping out volatile factors like petrol, ‘underlying inflation’ probably lifted 0.7% in the quarter or by 2.4% over the year.

In the June quarter, the CPI would have been boosted by the annual price increases by health insurance firms. There were also likely to have been seasonal price increases in international travel costs although offset to some extent by falls in domestic holiday travel and accommodation prices. The cost of ‘new dwelling purchase by owner-occupiers’ also likely rose in the quarter reflecting the high demand for home building services.

Also on Wednesday the Reserve Bank Governor delivers his annual luncheon speech in support of the Anika Foundation. There has been a fair bit happening of late, so it will be useful to hear the Governor’s views, including his views on home prices.

Overseas: US housing market data

On Wednesday, the monthly home price index from the Federal Housing Finance Agency is released. There isn’t the same hype on home price changes in the US as in Australia. Prices are rising at a sustainable rate despite super-low interest rates. In April, home prices lifted 0.3% to be up 5.3% over the year.

Also on Wednesday, data on existing home sales are issued. Economists estimate that sales lifted by around 1% in June to a 5.4 million annual rate after a solid 5.1% gain in May. The weekly data on mortgage activity is also issued – new lending and refinancing data.

On Thursday, the National Activity index is issued for the month of June as well as the June leading index and July survey of activity by the Kansas City Federal Reserve. Economists tip a 0.1% lift in the leading index after a 0.7% gain in May.

And on Friday in the US, the June data on new home sales is issued. After a solid 2.2% lift in May, new home sales likely plateaued at a 543,000 annual rate in June.

Also on Friday, the “flash” July readings on manufacturing activity in the US, Europe and China are released.

The only other indicator of note will actually be released a day before the start of this weekly rundown – Chinese home price data is scheduled for Saturday July 18.

Sharemarket, interest rates, currencies and commodities
On Monday, Morgan Stanley is amongst a small number of companies releasing earnings results.

On Tuesday, there are 20 firms from the S&P 500 index scheduled to be releasing earnings including Yahoo! Inc, Verizon Communications, Apple, Microsoft, Baker Hughes and Bank of New York Mellon.

On Wednesday, around 25 companies from the S&P 500 index report earnings results. Amongst those are Coca Cola, Texas Instruments, American Express, Boeing, and Newmont Mining.

On Thursday, around 50 companies from the S&P 500 index are expected to issue earnings results. Amongst those are Amazon, Caterpillar, E*TRADE Financial, 3M Co, Starbucks, General Motors, NASDAQ, Kimberley Clark and Eli Lilly.

And on Friday there are 12 companies listed to report earnings including State Street, Xerox and Moody’s.