By Craig James

The financial year draws to a close

The 2015/16 financial year ends on Thursday and there will be the usual retrospective look on the year’s results. There is also a healthy schedule of economic data over the week.

In Australia, the week begins on Tuesday when ANZ and Roy Morgan issue the weekly consumer sentiment reading. At present, households are in a happy place, with consumer confidence at a 2½-year high. Lower interest rates, cheap petrol prices and improved job security are all freeing up a few more spending dollars. However, while confidence levels are solid and household budgets are looking more attractive than in the past, the focus on the upcoming Federal Election will keep a lid on spending. Encouragingly, the measure on whether it is a good time to buy a major household item continues to rise – suggesting that once the election is out of the way, activity levels should lift.

On Wednesday, the Housing Industry Association (HIA) releases the figures on new home sales. In April, new home sales declined by 4.7%. The decline reflected a fall in both detached house sales and sales of multi-units. However, the falls were from 7-month highs and it is likely that the low interest rate environment will continue to support housing activity over the medium term.

On Thursday, the Australian Bureau of Statistics (ABS) releases two publications. The first ‘Job vacancies’ provides insights into the strength of the job market. And the second, ‘National Regional Profile’ (2010-14) includes ‘big picture’ regional economic data.

Also on Thursday, the Reserve Bank releases the financial aggregates publication that includes data on lending (private sector credit) and the money supply. In April, private sector credit (lending) rose by 0.5% to stand 6.7% higher than a year ago – the strongest growth in seven years. And it is likely that credit rose by a further 0.5% in May once again driven by owner-occupied housing and business lending.

Friday ushers in the start of a new month and as such, the focus will be on the CoreLogic release of home prices for June. Interestingly, home prices surged by 3.3% over April and May – marking the best back-to-back gains in 10 months.

The higher home prices in Sydney and Melbourne are causing more owner-occupiers and investors to consider other markets, lifting prices in other capital cities. Hobart home prices are up by 6.1% over the year, just shy of the fastest annual rate in almost six years.

The May rate cut would not have filtered through to mortgage rates till late May and therefore it is likely that home prices will continue to lift in coming months. Based on daily observations, home prices probably rose by 0.4% in June.

Also on Friday, the Australia Industry Group will release the Performance of Manufacturing Index (PMI). Manufacturing activity has eased in the past couple of months, but still remains in expansion territory having remained above 50 for 11 months – the longest period of expansion since September 2006. The lower Australia dollar will continue to support the sector.

US home prices and Chinese manufacturing activity dominates interest

In the US, the highlight in the coming week is the release of manufacturing activity and home prices. And in China, gauges on manufacturing are also released.

The week kicks off on Monday in the US with data on advance goods trade balance – an early version of the trade data, excluding services. Also on Monday, the Dallas Federal Reserve manufacturing index and the Markit services index is slated for release.

On Tuesday, the CaseShiller data on home prices is released together with the third read on US GDP, consumer confidence, and the influential Richmond Fed survey. Home prices are up 5% on a year earlier, while confidence may have edged higher from 92.6 to 93.1. The final reading on March quarter economic growth should show that the US economy grew at a 1% annualised pace.

On Wednesday, pending home sales and personal income/spending data is released. Economists tip a near 2% fall in pending home sales in May after the 4.6% surge in April. Some believe a housing shortage exists, with the inventory of existing homes for sale down 3.6% in April compared with a year ago. There are signs new listings have been slowing, as potential sellers worry they won’t be able to find another home to buy.

On Thursday, the Chicago purchasing managers index (PMI) and the weekly initial jobless claims figures are released.

And on Friday, US vehicle sales, construction spending and the ISM manufacturing index are set for release. Total vehicle sales should hold around 17.3 million, while the manufacturing index may have eased from 51.3 to 51.0 in June.

In China, the official statistician (National Bureau of Statistics) releases data on industrial profits on Monday, while the purchasing managers’ indexes for both the manufacturing and services sector are set for release on Friday. The Caixin variant of the manufacturing index is also issued.