Australia: The job market still dominates attention

  • There are few stand-out indicators slated for release in Australia in the week ahead. Most interest is in Thursday’s data on job vacancies and employment by industry.
  • The week kicks off on Tuesday when the Australian Bureau of Statistics (ABS) releases a raft of publications from the 2016 Census. Around a dozen publications will be issued or re-issued. Data on new home sales is also expected on Tuesday from the Housing Industry of Australia.
  • Also on Tuesday the Reserve Bank Assistant Governor (Financial Markets) Christopher Kent speaks at the Investment Implementation Summit in Sydney.
  • Roy Morgan and ANZ also release the weekly consumer sentiment data on Tuesday. Australian consumers are generally positive but confidence levels are still well short of those held by their US counterparts.
  • On Wednesday, the ABS releases the December quarter publication Engineering Construction Activity. While the ‘top level’ results have already been published, the publication goes into more detail about where the work is being done and how much activity is still to be completed.
  • On Thursday the ABS releases the Finance & Wealth publication. The publication contains a raft of indicators such as household debt and wealth and sectoral holdings of financial assets such as foreign ownership of shares and bonds. In the September quarter foreigners held $533.6 billion of Aussie shares, up from $531.5 billion in the June quarter. Foreigners held 30.3 per cent of the total (long-term average 32.9 per cent).
  • Also on Thursday, the ABS releases the latest data on job vacancies – a key leading indicator of the job market. In the three months to November job vacancies rose by 2.7 per cent to a record 210,300. Job vacancies are up 16.1 per cent on a year ago – the strongest annual growth rate in 7 years.
  • And detailed quarterly estimates on the job market are also on Thursday’s data docket including employment levels for industry sectors. The November 2017 data showed that Healthcare remained the biggest employer with 1.65 million employees (13.3 per cent of the total) followed by Retail Trade (1.29 million jobs or 10.4 per cent) and Construction (1.17 million or 9.4 per cent).
  • The Reserve Bank also issues the February Financial Aggregates publication on Thursday. Most interest is in the estimates of private sector credit (effectively loans outstanding) but measures of money supply are also released. In January private sector credit rose by 0.3 per cent after a 0.3 per cent rise in December. Annual credit growth held at a 3½-year low of 4.9 per cent.

Overseas: US inflation again in focus

  • There is never a shortage of new US economic data. In the coming week most interest is likely to be generated by the inflation indicators contained in Thursday’s report on personal income and spending.
  • The week kicks off on Monday when the Chicago Federal Reserve releases the national activity index. This index has risen for the last five months.
  • On Tuesday, the S&P/Case Shiller measure of home prices is released alongside the Conference Board’s measure of consumer confidence and the influential Richmond Federal Reserve manufacturing index. Home prices are up 6.3 per cent on a year ago, no doubt supporting consumer conference near 17-year highs. The usual weekly measure of chain store sales from Redbook Research is also issued on Tuesday.
  • On Wednesday the “advance” February figures on international trade is released with the pending home sales index and the final estimates of economic growth (GDP) for the December quarter. Data is expected to show that the US economy grew at a 2.6 per cent pace in the final three months of 2017.
  • While the GDP data will also include inflation estimates, investors will be more interested in the price estimates accompanying the personal income and spending data on Thursday.
  • Simply, the personal income figures are more recent (February). The measure to watch is the core personal consumption expenditure (PCE) deflator. Economists expect that core PCE deflator rose by 0.2 per cent in February, leaving the annual rate at 1.5 per cent – well short of the Federal Reserve’s 2 per cent goal.
  • Economists also expect that US personal income grew by 0.4 per cent in February, ahead of a 0.2 per cent lift in consumer spending.
  • Also on Thursday is the influential Chicago purchasing managers index is released as well as the weekly data on new claims for unemployment insurance (jobless claims).
  • In China on Saturday (March 31) the National Bureau of Statistics issues the purchasing manager indexes for both the manufacturing and services sectors.

Financial markets

  • Traditionally April is a good month for the Australian sharemarket. In the past six years the sharemarket has only fallen once. Go back 30 years and you’ll discover that the All Ordinaries has only fallen eight times in the month of April. And go back 70 years, average returns in April are 1.8 per cent, well ahead of the 0.6 per cent average monthly gain for all months of the year.
  • Few major companies go ex-dividend in April (that is, trade without the benefit of their dividends), thus supporting share prices. Also the fact that investors are looking to invest their dividend payments also supports the sharemarket in the month.