Investor Signposts: April 9, 2018

Finance and confidence in the spotlight

A broad sweep of economic indicators is released in Australia in the coming week together with a speech from the Reserve Bank Governor.

• On Monday the AiGroup releases the Performance of Construction index, an index that has risen for 13 months.
• On Tuesday the latest business survey from National Australia Bank is issued. In February the measure of business conditions hit a record (21-year) high. And to prove it wasn't an aberration, the latest manufacturing survey from AiGroup was reported at record highs in March.
• Apart from business confidence, measures that focus on prices, wages and employment will attract scrutiny in the NAB survey.
• Also on Tuesday the weekly gauge of consumer confidence is issued by ANZ and Roy Morgan.
• On Wednesday, the monthly variant of consumer confidence is released- this time from Westpac and Melbourne Institute. In March, confidence edged just 0.3 per cent higher. But the index of confidence remains above 100, indicating that there are more optimists than pessimists.
• In terms of economic data, on Wednesday the Australian Bureau of Statistics issues the December quarter data on building activity. As well as estimates of the amount of building work done, there are also figures on housing starts (or commencements) as well as the amount of work in the pipeline. Home starts rose by just 0.7 per cent in the September quarter.
• The Reserve Bank Governor, Philip Lowe, also delivers a speech on Wednesday. The topic of the speech hasn't been revealed as yet, but the speech is delivered to the Australia-Israel Chamber of Commerce in Perth.
• On Thursday the focus shifts to finance. The ABS releases the February figures on home lending while the Reserve Bank issues statistics on credit and debit card lending as well as ATM transactions. Home lending has slowed as markets rebalance and the number of new lending commitments for owner-occupiers has fallen in four of the past five months.
• And on Friday the Reserve Bank releases the bi-annual Financial Stability Review. The Reserve Bank will highlight the low level of problem loans and reduction in the share of interest-only housing loans being taken out. At the same time the Reserve Bank will express caution about the amount of new homes being completed and the potential impact they will have on home prices.

Overseas: Inflation data in focus

• There are key measures on consumer and producer prices to be released in both China and the US in the coming week together trade price data for the latter.
• The week kicks off on Tuesday in the US with data on producer prices (business inflation figures) as well as the small business optimism index from the National Federation of Independent Business (NFIB).
• The core measure of producer prices (excludes food and energy) may have lifted 0.2 per cent in March while the annual rate was likely to have remained unchanged at 2.5 per cent. The NFIB index may have softened in March in response to concern about a US-China trade war.
• The usual measure of chain store sales will also be issued on Tuesday.
• On Wednesday, data on consumer and producer prices will be released in China. And on the same day, consumer price data is released in the US alongside monthly budget data and the minutes of the last Federal Reserve meeting.
• The annual rate of Chinese producer prices may have lifted from 3.7 per cent to 3.8 per cent in March with consumer inflation down from 2.9 per cent to 2.5 per cent. In the US, the annual core measure of consumer prices may have crept higher from 1.8 per cent to 1.9 per cent.
• The minutes of the last Federal Reserve meeting will be dissected to find clues on the timing of the next rate hike.
• On Thursday, trade prices data (import and export prices) will be released in the US. And the usual weekly data on claims for unemployment insurance will be issued.
• On Friday the March trade figures will be released in China. Given the concern in the US about the size of the trade deficit maintained with China, these figures take on greater-than-normal significance.
• In the US on Friday the JOLTS series of job openings is issued – a forward-looking gauge on the job market. The University of Michigan also issues its preliminary estimates of consumer sentiment for March.

Financial markets

• According to FactSet, US analysts have lifted their March quarter earnings estimates for S&P 500 companies by 5.4 per cent. That result is important because earnings estimates generally fall in the first quarter. It is the strongest upgrade in earnings for the first quarter in the 15-year history of the series. Lower tax rates, higher energy prices and expectations for rate hikes in 2018 are some influences pushing up estimates for US earnings per share.