Investor Signposts: May 14, 2018
Australia's employment machine is the one to watch this week.
Australia: Wages growth and jobs report in focus
- In Australia over the coming week, the main focus will be on the latest quarterly Wage Price Index (WPI). Wage growth is crucial for the inflation and interest rate outlook. All eyes will also be on the employment report on Thursday.
- The week kicks off on Monday when the Reserve Bank of Australia (RBA) issues statistics on credit and debit card lending and ATM transactions for March. The average credit card balance rose by $94.10 to $3,180.70 in February – the largest increase in 2½ years.
- On Tuesday the Australian Bureau of Statistics (ABS) releases lending finance data. Total new lending commitments (housing, personal, commercial and lease finance) fell by 1 per cent in February to $70.7 billion. Commitments are up by 4.7 per cent on a year ago.
- Also on Tuesday the weekly gauge of consumer confidence is issued by ANZ and Roy Morgan.
- The RBA also releases minutes of its May Board meeting on Tuesday. However, the commentary is unlikely to provide fresh perspectives following the release of the quarterly Statement on Monetary Policy last Friday. Also, RBA Deputy Governor Guy Debelle speaks at the CFO Forum in Sydney and ISDA Forum in Hong Kong (by video link).
- Rounding out the data deluge on Tuesday, the ABS releases the Overseas Arrivals and Departures publication. The publication includes data on tourist flows as well longer-term migration data. A record number of Chinese, American and Indian tourists visited Australia in February.
- On Wednesday the much-anticipated data for the WPI for the March quarter is issued. The latest data on enterprise bargaining agreements showed average annualised wage increases lifting from 2.2 per cent to 2.5 per cent. Skills shortages are becoming more evident in high demand sectors as the labour market tightens. The wage price index is tipped to increase by 0.6 per cent to be up 2.2 per cent over the year to March.
- Also on Wednesday, the monthly Westpac and Melbourne Institute consumer confidence reading is released. In April confidence fell by 0.6 per cent as share market volatility and trade war rhetoric weighed on household sentiment. But the index remained above 100, indicating that there are still more optimists than pessimists.
- On Thursday the ABS issues the April employment report. The record-breaking job-creation machine has slowed in recent months. The net employment gain of just 4,900 in March reflected a softening in leading indicators, such as the ANZ job advertisements index. The unemployment rate remains 'sticky' at 5.5 per cent due to an increase in the participation rate. More females and older workers are working or looking for work than ever before. Economists tip an increase in total jobs of around 20,000 during the month.
- On Friday the CommBank Business Sales Indicator (BSI), a measure of economy-wide spending, is released for April. The annual trend growth in sales lifted to 7.2 per cent in March – the fastest growth for almost 3½ years.
Overseas: China monthly activity data dominates
- The monthly report cards on Chinese investment, production, retail sales and house prices will be issued over the week. In the US, a number of ‘top shelf' indicators will also be released such as sales and production.
- The week kicks off in China on Tuesday with April data on investment, production and retail sales to be issued. Manufacturing purchasing managers' indexes were broadly stable in April, implying that investment and production recorded respective annual gains of 7.5 per cent and 6 per cent over the year to April. And with consumer confidence near 20-year highs, annual growth of retail sales is tipped to remain near 10 per cent.
- The regular weekly data on US chain store sales will also be issued on Tuesday while mortgage finance data is on Wednesday and new claims for unemployment insurance on Thursday.
- In the US, the National Association of Home Builders (NAHB) index, business inventories, the New York State Empire manufacturing survey and retail sales data are all released on Tuesday. Retail sales rose 0.6 per cent in March, halting a streak of three consecutive monthly declines in sales. Consumers continue to show some restraint in discretionary spending. However, a lift of 0.4 per cent in retail spending is forecast.
- On Wednesday the National Bureau of Statistics issues China's 70-city housing price data for April. House price growth decelerated to 4.9 per cent in March, continuing the decline from a peak of 12.6 per cent in November 2016. Policymakers have announced stricter property-buying controls in an effort to cool prices. A further decline in the annual growth rate to 4.5 per cent is tipped by economists.
- Also on Wednesday US housing data is released. Housing starts rose by 1.9 per cent in March with building permits up by 4.4 per cent. The gains in the month were driven almost entirely by multi-unit dwellings.
- On Thursday economists expect that US industrial production rose a further 0.6 per cent in April. Manufacturing, utilities and mining are all contributing to the upturn in output. Capacity utilisation was at 78 per cent in March.
- Also on Thursday the influential Philadelphia Federal Reserve manufacturing gauge is released for May. There was a notable pick-up in the underlying prices paid index in April, signalling a lift in business inflationary pressures.
- The Conference Board's leading economic index for April is also scheduled for release on Thursday.
Craig James is the Chief Economist at CommSec.
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