A mixed bag on the domestic front

In the coming week, various price indexes will take centre-stage on the domestic economic calendar.

On Wednesday the Australian Bureau of Statistics (ABS) will issue data on selected cost of living indices while import and export prices indexes for the June quarter will be released on Thursday. And on Friday the ABS issues the Producer Price indexes (measures of business inflation). In the US the focus will rest squarely on the Federal Reserve two-day meeting on Tuesday and Wednesday (decision 4am Thursday, AEST).

The week kicks off on Tuesday when Roy Morgan and ANZ release their weekly reading on consumer confidence. Consumer confidence slumped 8 per cent from 18-month highs before rebounding by 4.5 per cent last week. In short, with Greece and Iran retreating from the headlines and both the Aussie dollar and iron ore prices stabilising, confidence has rebounded. A focus on solid fundamental domestic conditions may help confidence levels lift further in coming weeks.

On Wednesday the ABS issues some different living cost indexes for the June quarter, providing inflation perspectives for groups like pensioners and self-funded retirees.

On Thursday building approvals and import and export price indexes are reIeased. The building approvals data will be of main focus – given it is a forward looking measure on housing activity - although the data can be volatile. The number of dwelling approvals is expected to have lifted by 1 per cent in June after a 2.4 per cent increase in May.

Interestingly the value of approvals to build new homes was holding at a record high $57.1 billion in the year to May. Clearly home building will underpin growth of the economy over the coming year.

In the past, data on trade and producer prices (released Thursday and Friday respectively) were important, as they provided a guide to the more important estimates of consumer prices. But with the quarterly trade and producer price figures issued after the release of the Consumer Price Index, they are more of interest to economists divining future price pressures. And unfortunately there is no exact science that relates the trade and producer price data to broader economy-wide inflation.

For the record we expect that producer prices rose by 0.6 per cent in the June quarter to be up around 1.4 per cent on a year ago.

Also on Friday, the Reserve Bank releases private sector credit (or data on loans outstanding) for June. In May, credit rose by 0.5 per cent to stand 6.2 per cent higher than a year ago – around the strongest growth in six years.

Overseas: Federal Reserve meeting dominates interest

There is a bevy of ‘top shelf’ economic indicators for release in the US with a meeting of Federal Reserve policymakers thrown in for good measure. There is no data out of China after a couple of big weeks.

The week kicks off in the US with the durable goods orders and the Dallas Fed manufacturing index released on Monday. And on Tuesday, the consumer confidence index is issued together with the S&P/Case Shiller measure of home prices and the Markit Services index. Home prices may have edged up just 0.4 per cent in May.

Over Tuesday and Wednesday, the Federal Reserve Open Market Committee (FOMC) meets to decide monetary policy settings. The guessing game on when the Fed will lift rates won’t be resolved. However the text of the decision will be important in determining whether the Fed is on course to lift rates in the December quarter of this year.

Also on Wednesday, pending home sales data is released. Pending home sales are expected to have lifted by 1 per cent in June after a 0.9 per cent lift in May. The housing sector continues to be a source of strength for the US economy.

On Thursday the first reading (‘advance’ measure) of economic growth in the June quarter will be issued. Economists expect that gross domestic product (GDP) grew at an annualised rate of 2.5 per cent in the June quarter after contracting 0.2 per cent in the March quarter – signalling that the economy has rebounded following the influence of harsh winter weather early in the year.

Also on Thursday the usual weekly figures on jobless claims – new claims for unemployment insurance – are issued.

On Friday, the Chicago purchasing managers index – an influential regional survey – is released alongside the University of Michigan Consumer Sentiment index.

Sharemarket, interest rates, currencies & commodities

After hitting top gear last week the US earnings season continues along the same vein. And it’s a case of so far so good with Thomson Reuters estimating that 70 per cent of S&P 500 companies have reported earnings above analyst expectations, topping the 64 percent average beat rate since 1994. However a weaker 53 percent have topped revenue forecasts, below the 61 per cent average beat rate since 2002. No surprise that the stronger US dollar has borne the brunt of the blame.

On Monday, nine stocks from the S&P 500 index are expected to report including Gilead Sciences. On Tuesday there are another 38 companies listed to report including DR Horton, Merck, Pfizer and United Parcel Service.

On Wednesday earnings results are expected from another 49 companies including Goodyear, Facebook, MasterCard, and Garmin.

On Thursday 45 companies should issue profit results including Colgate-Palmolive, ConocoPhillips, Expedia, Iron Mountain, ResMed, Time Warner and Procter & Gamble.

And on Friday there are 8 companies listed including Chevron and Exxon Mobil.