Investor Signposts: February 16, 2018
Right now, wages growth is the hot topic in Australia.
Australian wages growth is crucial to the inflation and interest rate outlook
- This week is all about wages growth in Australia. The December quarterly Wage Price Index is arguably the most important data released so far this year from an inflation and interest rate setting perspective. The semi-annual update on average weekly earnings will also be keenly observed.
- The week kicks off on Monday when the Australian Bureau of Statistics (ABS) issues the Overseas Arrivals and Departures publication that includes short and longer-term tourist and immigration data. Record numbers of Chinese tourists are holidaying in Australia, boosting spending in our retail and accommodation sectors.
- On Tuesday the Reserve Bank releases the minutes of its February Board meeting. Few additional insights are expected following the release of the quarterly Statement of Monetary Policy on February 9. The Bank's growth and inflation forecasts were left unchanged which means interest rates are on hold for some time.
- Also on Tuesday the weekly ANZ-Roy Morgan weekly consumer sentiment results are released. And the Assistant Governor (Financial System) at the Reserve Bank, Michele Bullock, is scheduled to address the Responsible Lending and Borrowing Summit in Sydney.
- On Wednesday the much-anticipated December quarter Wages Price Index is issued by the ABS. Wages growth has lifted off 20-year lows.
We expect that wages rose by 0.6 per cent in the quarter, lifting annual growth from 2.0 per cent to 2.1 per cent. The labour market is tightening on strong jobs growth. Near decade-high business conditions and solid company profits are pre-conditions for pay rises.
However, the Reserve Bank is only forecasting a gradual lift in wages: a “key uncertainty” for the inflation outlook.
- Also on Wednesday construction work done for the December quarter is released by the ABS. Construction work surged by 15.7 per cent in the September quarter. Roads, rail and public transport infrastructure-related spending is booming, but residential dwelling construction may have eased.
- We expect the Department of Jobs and Small Business' Skilled Internet Job Vacancies Index to have risen for a fifteenth consecutive month in January when released on Wednesday. The index has risen to 5½-year highs as demand for skilled occupations improves across the economy.
- The average weekly earnings data is released every six months. However the figures are important as they provide dollar estimates of wages in the economy across states and industries. The figures are issued by the ABS on Thursday.
Overseas: Focus on the US Federal Reserve
- Data releases are light in a holiday-shortened week in the US. The main interest will be the minutes from the last US Federal Reserve policy meeting in January. Chinese property prices are scheduled to be released at the end of the week.
- The President's Day public holiday is observed in the US on Monday. Financial markets are closed.
- On Tuesday the usual weekly figures on US chain store sales – a measure of consumer spending – are released.
- On Wednesday the US Federal Reserve issues the minutes of the January 30-31 meeting. Commentary on wages growth will be highly sought after by investors after the latest reading – the highest in over eight years – caused markets to reprice inflation expectations higher. US existing home sales have hovered near 10-month lows on record low supply. A modest increase from 5.57 to 5.6 million units is tipped in January.
- Also on Wednesday the ‘flash' Markit February manufacturing and services purchasing managers' indexes are released in the US, Europe and Japan. Business activity remains expansionary amid a synchronised pick-up in global growth across developed economies.
- On Thursday the Conference Board's Leading Economic Index mat have risen for a fourth consecutive month in January. The index increased by 3.1 per cent in the second half of 2017 after rising by 2.6 per cent for the first half of the year. The underlying components of the index remain strong. The usual weekly data on claims for unemployment insurance (jobless claims) is also down on the Thursday data docket.
- Also on Thursday US Federal Reserve voting member, Atlanta President, Raphael Bostic, gives a speech at the Banking Conference in Atlanta.
- On Saturday attention turns to China with data on property prices to be released for the month of January. The housing market picked up in December as small declines in large cities stabilised and smaller cities gained some momentum, but price growth more than halved in 2017 as government curbs on speculation took effect.
- The Australian corporate reporting season continues this week.
- Amongst companies to report on Monday are Brambles, SEEK, NIB, Domain, Beach Energy and oOh!Media.
- On Tuesday, earnings include those from Oil Search, Super Retail Group, Investa Office Fund and APN Outdoors.
- On Wednesday, profit results include those from Coca-Cola Amatil, Scentre Group, Santos, Wesfarmers, Lendlease, Fortescue Metals, Downer and Stockland.
- On Thursday results include: Alumina, CharterHall, Crown Resorts, Flight Centre, OceanaGold, OzMinerals, Qantas, Perpetual, Link Administration and Sirtex Medical.
- On Friday, earnings may include Westfield, Woolworths, Accent, Automotive Holdings, MYOB and Platinum Asset Management.
Craig James is Chief Economist at CommSec.
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