Quiet week on the domestic calendar
For Aussie economists, the coming week is not a bad time to take a short holiday. Apart from minutes of the last Reserve Bank board meeting, there are no top shelf economic indicators. Thankfully there is a little bit more data in the US with the minutes of the last Federal Reserve meeting the highlight on Wednesday
In Australia, the week kicks off on Monday with data on new vehicle sales. The industry body -- the Federal Chamber of Automotive Industries -- has already released the July data in unadjusted terms (VFACTS data). That is, the data hasn’t been adjusted for seasonal influences.
The VFACTS data showed that new car sales fell by 0.4 per cent over the year to July 2014. But the real strength has been SUV sales. Over the year 341,368 new sports utility vehicles (SUVs or 4WDs) were sold, a record 30.4 per cent of total vehicle sales.
On Tuesday, the Reserve Bank issues minutes of the last Board meeting held on August 5. Given that a statement was released after the meeting and the Statement of Monetary Policy was issued last Friday, it is unsure how much extra information the Reserve Bank could provide. But analysts and investors alike will still pore over the commentary.
The Reserve Bank Statement of Monetary policy provided a clear indication of how policymakers are viewing the economic landscape. And it was largely of an economy in transition. The Reserve Bank is seemingly still trying to assess how the transition will occur from declining mining investment to a pickup in non-mining sectors. As such there is a fair degree of uncertainty about the future. No surprise that in such an environment, policymakers will maintain stable interest rates and watch and see how the economy responds to conflicting forces.
The key is that the Reserve Bank has plenty of time on its side to sit back and assess how the economy pans out. Certainly with the labour market recovery in its infancy and wage growth subdued, this will ensure that inflation remains well and truly in check over the forecast period.
Not only were inflation and growth forecasts revised lower, but even the terms of trade outlook was softened, suggesting that the economy is likely to have a little more slack than previously thought. And while the downgrade to forecasts was for the most part incremental (and not materially different than six months ago), the Reserve Bank has taken a mildly more cautious view. Interest rates are solidly on hold.
Also on Tuesday, the weekly ANZ-Roy Morgan Consumer Confidence Rating is released. Last week the Roy Morgan Consumer Confidence index fell by almost 6 per cent, largely as a result of the headline-grabbing news that the unemployment rate had lifted to a 12-year high of 6.4 per cent. No doubt consumers and households have become more worried about job security.
We expect consumer confidence to rebound in coming months. As the strength in home prices and sharemarkets come to the fore, more Aussies are likely to realise that the economy is in solid shape and interest rates are going nowhere. More confident consumers should lead to better operating conditions for businesses.
The ABS issues data on imports for the month of July on Tuesday. Given that a third of economy-wide spending is taken up by imports (and a far higher proportion for goods alone), the data provides a timely assessment of business and consumer activity. But changes in oil prices and the Australian dollar can distort analysis.
Focus shifts to the US Federal Reserve
In the coming week, a gamut of top shelf US economic indicators compete for attention with the minutes of the last Federal Reserve Open Market Committee meeting -- the FOMC being the policymaking committee of the US central bank. In contrast, it is a quiet week for new economic data in China
In the US, the week kicks off on Monday with the release of the homebuilder sentiment index (NAHB index). The housing sector continues to be big growth driver in the US.
On Tuesday data on consumer prices and housing starts are issued together with building permits. Analysts expect housing starts to lift by a sizable 8.6 per cent in July, virtually recovering most of the 9.3 per cent slide in June. Similarly building permits are expected to rebound by around 3 per cent in July.
The consumer price index for July should once again show that inflation remains well contained. In June the consumer price index rose 0.3 per cent to be up 2.1 per cent over the year. Gasoline accounted for two-thirds of the gain lifting by 3.3 per cent. Stripping out food & energy prices, core CPI rose by a tame 0.1 per cent in June to be up just 1.9 per cent on year ago. Economists tip just a 0.2 per cent lift in the July core result.
On Wednesday the FOMC minutes will be dissected for any clues about when the Fed will shift its views on eventual rate hikes. The ‘tapering’ program is winding down and it’s very likely that the Fed will been keeping clear of any rate hike rhetoric, particularly given that inflation remains subdued.
On Thursday the usual weekly data on claims for unemployment insurance is issued in the US. But on the same day existing sales and the Philadelphia Fed survey are also released alongside the leading index. The leading index is tipped to have lifted by 0.6 per cent in July while existing home sales are expected to have eased by 0.8 per cent. The “flash” manufacturing readings for August are also released in the US, Europe and China.
Australian profit-reporting season
The Australian profit-reporting season moves into top gear in the coming week. On Monday, earnings are expected from Newcrest, Stockland, Aurizon and Ansell.
On Tuesday, earnings include those from Amcor, Arrium, GWA Limited, Hills Limited, Investa Office, Invocare, Macmahon Holdings, BHP Billiton, QBE Insurance, Insurance Australia Group, Oil Search, Sonic Healthcare, Tassal and Toll Holdings.
On Wednesday, among those scheduled to issue their profit results are Woodside, Ausenco, Wesfarmers, APA Group, Bega Cheese, APN News & Media, Challenger, Charter Hall, Fletcher Building, Mount Gibson Iron, Southern Cross Media, Seek Limited, The Reject Shop, Paperlinx, Brambles, AGL Energy, Fortescue & Coca Cola Amatil.
On Thursday, earnings are expected from Asciano, CFS Retail Property Trust, ASX, AMP, Sydney Airport, Tatts Group, Mirvac, Origin Energy, Treasury Wine Estates, Transpacific, Paladin and Super Retail Group. And on Friday earnings include those from Santos, Telecom NZ, Sims Metal, IOOF, QUBE Holdings and Federation Centres.