By Craig James

Jobs and housing in focus 

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. 

Job ads have been trending higher for more than 18 months and are now up almost 10% over the year. 

Turning to the inflation gauge, the headline index was up 0.3% in May after a similar increase in April. The annual rate of inflation held steady at 1.4%. And annual growth of the underlying rate (trimmed mean) eased from 1.4% to 1.3%. The bottom line being that inflation remains well contained. 

Inflation is contained, home building is soaring, consumers are spending freely and businesses appear to be embracing the federal Budget stimulus. So no change in interest rate settings is expected. The key question is what will be the next move in interest rates, and when will the rate change be delivered? And on both these questions, economists appear divided. Some still think that interest rates could fall. But a growing number believe the Reserve Bank is now on the sidelines, perhaps to 2016. 

Also on Tuesday the Bureau of Statistics (ABS) releases the May data on tourist arrivals and departures as well as migration figures. The ABS has being playing ‘catch up’ for the past few months after software problems caused delays in the production of these key indicators. From here on, the data will be one of the timeliest, providing key insights into the outlook for consumer spending and housing. 

On Thursday the ABS releases the June jobs data. And if one indicator has surprised in recent months it has been this one. Most assumed that unemployment would trend higher if the economy was growing at only a 2.3% annual pace. Not so. Job growth over the past six months has been the best in over four years. And the jobless rate has fallen, not increased. CommSec expects jobs rose by 10,000 in June and the jobless rate probably held at 6%. 

And on Friday the ABS releases the May data on housing finance. Data from the Bankers Association suggested that new lending commitments slumped by around 5% in the month. If the forecast is confirmed then it may suggest that lenders are indeed tightening lending criteria. Either that or high prices could be choking off some of the effervescent demand for homes. 

International: Mix of US and Chinese economic data 

On Tuesday, the US JOLTS survey on job openings is issued together with trade figures (exports and imports) and consumer credit data. The usual weekly data on chain store sales is also released. 

On Thursday the usual weekly data on jobless claims – new claims for unemployment insurance are released. This timely indicator provides a regular check on the health of the job market. 

And on Friday the Federal Reserve chair, Janet Yellen, delivers a speech while data on wholesale sales and inventories in the US is also scheduled. 

In China, the official statistician (National Bureau of Statistics) releases data on producer and consumer prices. Business deflation still exists with producer prices down 4.6% over the year. And consumer inflation is well contained with prices up just 1.2% over the year. Low inflation readings will give the authorities further scope to cut rates if it is decided that more stimulus is required. 

Sharemarket, interest rates, currencies and commodities 

In the US, the earnings season – profit reporting season – has come around again. Mining company Alcoa traditionally kicks off the season, and it is has that lead position again, with the company scheduled to report earnings on Wednesday. PepsiCo and Walgreens Boots follow with earnings results on Thursday. 

And despite key US share indexes not far from record highs, earnings expectations aren’t encouraging as shown in the analysis from “The latest data from S&P Capital IQ indicates second quarter earnings per share is projected to decline 4.4% to $28.42. On April 1, it was thought second quarter EPS would decline 2.1%.”

In Australia, one of the more interesting results over the 2014/15 year was the relative absence of broader volatility. Certainly daily volatility picked up late in the financial year with investors jittery over rising bond yields and the Greek debt crisis. 

But at the same time investors showed some comfort with the sharemarket in the 5,200-6,000 range. In 2014/15, the gap between the year’s highs and lows for the ASX 200 index was just 17.1% – the smallest range for the index in 14 years. That result should provide investors with comfort that the market has fundamental support.