Investor Signposts: May 28, 2018
Business investment and home prices in focus.
Australia: Business investment and home prices in focus
- A relatively quiet week beckons in terms of new economic data. Home prices, building approvals and business investment are the indicators of most interest.
- The week kicks-off on Tuesday when Roy Morgan and ANZ release the weekly consumer sentiment results.
- On Wednesday, local council building approvals data for April is issued. Approvals to build new homes rose by 2.6 per cent in March. Strong population growth is lifting demand for housing in Victoria. The value of building approvals hit a record high of $126.4 billion over the year. Annual commercial building approvals stand at a record high of $48 billion.
- On Thursday the Australian Bureau of Statistics (ABS) releases the Private Capital Expenditure publication (essentially business investment figures). New investment grew by four per cent over the year – the fastest annual growth rate in five years.
- In the December quarter, the future spending plans were also positive. The upgrade in investment plans from the fourth to the fifth reading for the current financial year was the strongest for an equivalent period going back eight years. The other good news is that there is a broad-based lift in actual annual investment spending across the non-mining-focused states and territories.
- Also on Thursday the Reserve Bank releases the monthly Financial Aggregates publication that includes the private sector credit measure (effectively ‘loans outstanding'). While most attention has been on housing credit growth, business credit posted a welcome increase of 0.8 per cent in March after three consecutive weak prints. Could this be the much-awaited inflection point following a period of strengthening non-mining business investment?
- On Friday CoreLogic releases home price data for May. And based on the weekly observations (to May 20), home prices in all the five mainland state capitals were either flat or slightly lower during the month. So far in May, Melbourne and Sydney home prices are down by 0.4 per cent and 0.2 per cent, respectively. Sydney home prices are down by 3.9 per cent, the weakest annual outcome in over five years.
- Also on Friday the Housing Industry Association is scheduled to release its new home sales report for April. And both AiGroup and Commonwealth Bank release surveys of manufacturing purchasing managers.
Overseas: Heavyweight US economic growth, personal spending and employment data
- Following the Memorial Day public holiday on Monday, the US enters the Northern Hemisphere summer with a tier-1 data deluge. Economic growth, employment and the US Federal Reserve's preferred measure of inflation, are all released. Chinese manufacturing and services purchasing manager gauges are also issued.
- The week kicks off on Tuesday in the US when the CaseShiller home price and Conference Board consumer confidence surveys are released. Home prices grew at a healthy annual rate of 6.8 per cent in February. And the consumer confidence index is hovering near 17-year highs due to improving job security. The Dallas Fed manufacturing index and regular weekly data on US chain store sales round-out the data releases.
- On Wednesday the second (preliminary) estimate of US economic growth for the March quarter is issued. The initial estimate suggested that the economy grew at a 2.3 per cent annual rate. And only a modest upgrade in growth to 2.4 per cent is tipped as consumer spending softened over the winter months.
- Also on Wednesday the advance report on goods trade is issued for April. The US trade deficit in goods narrowed by 10.3 per cent to $US68.3 billion in March - the first narrowing of the deficit in seven months as imports weakened. The private sector ADP employment report, US Federal Reserve Beige Book of regional economic conditions and mortgage finance data are also released.
- China's National Bureau of Statistics issues the purchasing managers' surveys for May on Thursday. Manufacturing and services activity have been stable. According to the State Information Centre, China's economy is likely to grow at an annualised rate of 6.7 per cent over the June quarter.
- In the US on Thursday the personal income and spending report is released. The US Federal Reserve's preferred measure of inflation – the personal consumption expenditure deflator – will be keenly observed. The deflator is expected to increase by 0.1 per cent to an annual growth rate of 2 per cent in April.
- Also on Thursday data on new claims for unemployment insurance, pending home sales and the regional manufacturing survey from the Chicago Federal Reserve are all issued.
- On Friday the Chinese private sector Caixin purchasing manager's index for manufacturing is released.
- Also on Friday the US jobs and ISM manufacturing reports for May are issued. The unemployment rate is forecast to remain stable at a 17½-year low of 3.9 per cent while an additional 185,000 jobs may have been created in the month.
- The prices gauge of ISM index hit 7-year high in April, stoking inflationary concerns as manufacturers passed on input price increases. And construction spending is tipped to rebound by 1.1 per cent in April following a 1.7 per cent decline in March.
Craig James is the Chief Economist at CommSec.
The Intelligent Investor Equity Income Portfolio is now available as a listed fund trading under ASX code: INIF. Holdings in the Fund will mirror the Equity Income Portfolio, has the same low costs, but you can buy it on the ASX.
You can save yourself the broking by applying during the initial offer. Offer closes Friday, June 8, 2018.
Want access to our latest research and new buy ideas?
Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.Sign up for free
Join the Conversation...
There are comments posted so far.