By Craig James

The Reserve Bank dominates the economic calendar in the coming week. The Reserve Bank Board meets on Tuesday and the data to watch includes job advertisements and retail trade, due out on Monday and Tuesday respectively. In the US, focus is on the minutes of the June Federal Reserve meeting released on Thursday and the employment data out on Friday.

The week kicks off on Monday with ANZ publishing its series on job advertisements, while TD Securities and Melbourne Institute issue its monthly inflation gauge. The Australian Bureau of Statistics (ABS) also releases data on building approvals.

Building approvals have been volatile over the past few months. Dwelling approvals rose by 3% in April, while the value of all building soared by 18.3% – the biggest monthly rise in four years. Building was at record highs in trend terms. It is clear that overall, home building will be a big driver of economic growth over the coming year. For the record, we expect a 3% fall in approvals in May.

The job market remains in solid shape. In May, job advertisements posted the biggest rise in eight months to be up more than 9% on a year ago. It’s important to note that job ads aren’t as good a leading indicator on employment as they were a few years ago.

Turning to the inflation gauge, the headline index fell by 0.2% in May. The annual rate of inflation eased from 1.5% to 1%. Excluding volatile items like petrol and fruit and vegetables, the core inflation gauge was up by 1.5% over the year. The bottom line is that inflation remains well below the Reserve Bank’s 2-3% target band.

On Tuesday investors will focus on the Reserve Bank Board meeting. The weak inflation landscape and volatile financial markets is likely to weigh against higher home prices and healthy consumer confidence.

Until last Friday, the RBA seemed likely to await the next quarterly inflation reading in late July before deciding whether to lower the cash rate again. While August is still the meeting most likely to see a cut, the meeting on the 7th of July is now very much ‘live’, given the financial market volatility.

Also on Tuesday the (ABS) releases the May data on retail trade and international trade, while ANZ and Roy Morgan will issue the weekly consumer sentiment reading. At present, households are in a happy place, with consumer confidence easing a touch from 2½-year highs last week.

Consumer spending has been soft in recent months, ahead of the Federal election. However, the lift in consumer confidence – particularly the upbeat measure on whether it is a good time to buy a major household item – is encouraging. We expect retail trade to rise by 0.2% in May after a similar lift in April.

On Wednesday, data on tourist arrivals is released. Interestingly, tourists to Australia from mainland China have lifted to record highs. Tourists from China and Hong Kong combined exceeded 1.35 million in the past year, up 21% over the year and moving well past the 1.31 million visitors from New Zealand.

US employment under the spotlight

In the US, the highlight in the coming week is the release of employment data on Friday, while investors will also pay attention to the Federal Reserve minutes released on Thursday.

The week kicks off on Tuesday when data on factory orders, and the regional ISM New York survey are released. Economists expect factory orders to have eased by around 2% in May while the New York ISM survey should continue to show a mild contraction. Also the final revisions on durable goods orders – proxy for business investment - for May are released.

On Wednesday, the trade balance for May is released, with expectations of a deficit of $40 billion.

On Thursday, the usual weekly data on claims for unemployment insurance is released, alongside the ADP private sector employment report and also the ISM service index for June. Economists tip an 185,000 rise in private sector jobs for June.

Also released on Thursday are minutes of the June Federal Reserve meeting. The minutes should provide investors with a little more information on the ‘hot button’ issues for Federal Reserve members.

And on Friday, the June data on employment is released – the non-farm payrolls data. Economists expect that 190,000 new jobs were created in June, while the unemployment rate may have held steady at 4.7%. Also on Friday, consumer credit (lending figures) are released.

Sharemarket, interest rates, currencies & commodities

With the 2015/16 complete, it is an opportune time to provide investors with an update of how investments, financial markets and economies have performed over the past year.

Overall, it has been another challenging year, but one that should provide satisfaction for Australian policymakers. Economic growth has lifted, not slowed. That is despite the transition from the once-in-a-century mining construction boom, to mining production and housing-driven growth.

The inflation rate has eased, in line with the global experience. Cash rates were cut to record lows in May. Iron ore and oil prices fell, but then rebounded. The US lifted interest rates for the first time in nine years. And the financial year is ending with jitters about the UK vote to leave the European Union membership.

The Australian share market started 2015/16 with the All Ordinaries at 5,451.2 and the ASX200 at 5,459. Currently the All Ords is at 5,310.40 and the ASX200 is at 5,233.40.

Of the 21 current industry sub-sectors, 12 sectors are currently higher over 2015/16. The key under-performer has been energy, down by 26.6%, followed by the banking (down 17.3%) and insurance (down 10.2%) sectors.

Strongest growth has been by the Autos and Components sector (up 27%) followed by Pharmaceutical & Biotechnology (up 22.6%) and Food, Beverage & Tobacco (up 22.3%).