The Economic View: November feeders

November tends to be the ‘final' trend month of a calendar year. This is due to the fact December gets swept up in the so-called ‘Santa rally'.

Despite being a market phenomenon, it also filters into the macro data with consumption, consumer confidence and economic activity in general moving to the upside due to the stimulus that is Christmas.

January, on the flip side, is historically a slow month economically as work done is lower due to summer holidays, while spending is impacted by the over-spend in December (even with the January sales). This means we need to wait until February to get a read for the new calendar year.

So, in November 2017, what's important and what insights may it give into 2018?

Economic data points for November:

Retail sales:

Expected to be better, with confidence slightly higher and job security positively impacting sales. However, overall retail sales have been anaemic – the average month-on-month figure has been around 0.3 per cent.

Looking into 2018, spending is facing further headwinds with low wages growth and a possible slowing of the housing market impacting individual wealth positions, which will impact consumption.

Exports:

This has been a bright spot in 2017. However, expectations are that exports will slow to the finish of the year due to China clamping down on imports. But, looking to 2018, exports are likely to remain the bright spot as global growth is accelerating, which will create demand for bulk commodity exports.

Reserve Bank:

Will the board grow wings? Having turned ‘dead' neutral in the second half of the year, has the recent inflation data pushed the RBA back towards a ‘dovish' tone? One would argue it will have too. Considering the mandate of the RBA is “[to] maintain core inflation in a 2% to 3% band” the read into 2018 is that the RBA will be unmoved all year.

Possible levers that could impact 2019:

Australian dollar:

The Australian dollar is under real pressure now, with the RBA unlikely to move on rates in the coming 14 months.

Yet, the Federal Reserve is likely to hike rates at least twice over the same period. This should see a lower $A, which should be a positive for US-denoted industries and goods (think commodities, education, tourism etc).

The $A could finally be a catalyst for additional economic impacts on the upside as the value of goods sold increases on the $US tailwind.