Investor Signposts: July 9, 2018

Australia: Winter break 

• After a hectic start to the new financial year, a quieter week follows in Australia. Monthly business and consumer surveys, together with housing and lending finance data feature prominently.
• The week begins on Sunday, when Reserve Bank Assistant Michele Bullock speaks at the 5^th Bund Summit on Fintech in Shanghai, China.
• In terms of economic data, the week kicks off on Tuesday with the release of the National Australia Bank (NAB) business survey. The business conditions index fell from an upwardly-revised record high of 21.2 points (previously 21.1 points) in April to 15.1 points in May. The business confidence index fell from an upwardly-revised 10.6 points (previously 10.1 points) in April to 6.2 points in May.
• Australia's businesses are largely in good health and the drag from the end of the mining construction boom is receding. Jobs are being created, but employers need to lift wages to prompt an uptick in price inflation.
• Also on Tuesday, the latest weekly reading on consumer confidence is issued by Roy Morgan and ANZ.
• Consumer views on current economic conditions (for the next year) have been near record-high levels. Solid economic growth, robust business activity data and the passing of the Turnbull government's personal income tax cuts legislation have lifted spirits. Jobs growth is still strong, but goods prices remain low. Interest rates won't lift in the short-term.
• On Wednesday, the monthly Westpac and Melbourne Institute consumer confidence reading is released. The gauge rose by 0.3 per cent to 102.1 in June. The index is above its long-term average of 101.5. A reading above 100 denotes optimism.
• Also on Wednesday, data on home loans (housing finance) is issued. The number of loans (commitments) by home owners (owner-occupiers) fell by 1.4 per cent in April – the fifth consecutive monthly decline. Loans are down by 2.9 per cent on the year. Data from the Bankers Association implies that the value of home loans may have fallen by 2 per cent in May. Developments in the housing market will continue to be closely watched by policy makers.
• The Reserve Bank estimates on credit and debit card lending are released on Thursday. Credit card debt fell in April. The number of debit card purchases are building. The trend away from credit cards continues. Aussie companies such as Afterpay Touch continue to drive retail and payments innovation.
• And on Friday, broader lending finance figures are released. Total new lending commitments (housing, personal, commercial and lease finance) rose by 0.9 per cent in April to $69.6 billion. Commitments are down by 0.8 per cent on the year.

Overseas: Focus is on China data and US consumer prices

• All eyes will be on China this week, headlined by consumer and producer prices, trade, money supply and lending data for June. US inflation data will also be keenly observed.
• The week begins in the US on Monday, when the May data on consumer credit is released. The increase in consumer credit in April was the lowest since September 2017, implying that rising interest rates may have driven consumers to pay down debt, tempering their demand for credit.
• On Tuesday, Chinese consumer and producer prices are released. Consumer prices are forecast to lift by 0.3 per cent to be 2.1 per cent over the year to June due to a rebound in food prices. Producer prices are tipped to fall to 3.8 per cent from 4.1 per cent.
• Also on Tuesday, the US JOLTS series of job openings, weekly data on chain store sales and small business sentiment gauge – the NFIB business optimism index – are released. In May, the NFIB index was at the second highest level in 45 years with businesses reporting elevated compensation, profits, and sales trends. US job openings rose to a fresh record high in May, with vacancies exceeding the number of unemployed workers.
• On Wednesday, US producer prices are issued for June. Business prices (final demand) increased more than expected over the year to May at 3.1 per cent - the biggest annual gain in nearly six and a half years.
• On Thursday, attention returns to China. The People's Bank of China cut the bank Reserve Requirement Ratio on June 24 and tweaked its commentary on monetary policy to "appropriately ample", signalling a looser policy stance. Loan growth may increase by 0.1 per cent to 12.7 per cent over the year to June. Broader credit growth is likely to continue to decelerate as the Chinese economy deleverages.
• Also on Thursday, the US Treasury releases the monthly budget deficit. The US posted a US$146.8 billion budget deficit in May, the largest for the month since 2009, as revenue declined. The regular weekly data on new claims for unemployment insurance is also issued on Thursday.
• On Friday, the June data on exports and imports is released in China. A trade surplus of US$24.92 billion was recorded in May, down from US$28.78 billion a month earlier. However, much of the interest in the data will be on the latest estimates of China-US trade given ongoing tariff tensions.
• Also on Friday, US export and import prices and consumer confidence are issued. In May, import prices recorded their largest annual advance since February 2017 at 4.3 per cent. US consumer sentiment remains elevated, but has declined since March, driven by rising tariff concerns. Favourable views on jobs and wages continue to be a support for households.

Ryan Felsman is a Senior Economist at CommSec