The Week Ahead

Another busy week

After this week’s avalanche of data, another round of top-tier economic indicators is expected over the coming week. At least another seven economic indicators are due for release in Australia. In the US, the key economic data isn’t released until late in the week. And in China, key economic data is released on Monday, Thursday and Saturday, covering trade, inflation, production, investment and retail sales.

In Australia, the week kicks off on Monday with job advertisements. In the past, the job advertisement figures were valuable as a leading indicator of employment. But now more jobs are posted on individual company websites, social media such as LinkedIn, Facebook and even Twitter, and job placement agencies.

But the jobs ads data is still watched for turning points. In that context there have been encouraging signs, with a lift in business hiring intentions in the last couple of months.

On Tuesday two indicators of note are released: the National Australia Bank business survey and housing finance data are released. The business survey covers key business indicators, a reading on business confidence as well as gauges on prices, wages and finance. The indicators of confidence and conditions have showed encouraging improvement since the budget, with a particular focus on a lift in profitability.

The housing finance data are new commitments made by lenders for the purchase or building of homes and renovations. We expect that the number of loans made to owner-occupiers (those who want to live in the homes) rose by 1.3 per cent in July. Clearly housing has taken over as the growth driver for the broader economy.

On Wednesday, results of the monthly Westpac/Melbourne Institute consumer confidence survey are released. But ANZ/Roy Morgan compiles a more timely weekly survey each Tuesday. Consumer views about their finances over the next year have improved to the best levels in four months -- a result that should show up in the monthly survey.

On Thursday the ABS releases the monthly employment figures. Overall we expect that the number of jobs rose by around 17,000 in September, while the participation rate may have eased from 64.8 per cent to 64.7 per cent. As a result we expect that unemployment eased from 6.4 per cent to 6.2 per cent.

Closing out the week on Friday, the Reserve Bank releases monthly data on credit and debit card lending. Consumers are still conservative, preferring to use their own money (debit cards) rather than use credit to make purchases. Also on Friday the Australian Bureau of Statistics will release lending finance figures, which include housing, personal, business and lease loans. Overall lending is holding at 6½-year highs driven by a healthy lift in home lending.

Overseas: Chinese economic data in focus

In the US, the week kicks off on Monday with consumer credit figures and the employment trends report. Economists expect that consumers continue to warm to low borrowing costs with credit tipped to have expanded by $US17.2 billion in July after a similar $US17.26bn increase in June.

On Tuesday the weekly data on chain store sales is released – a timely gauge of consumer spending trends.

On Wednesday wholesale inventories and sales data for July is released together with the weekly data on mortgage finance commitments, both for purchasing new dwellings and refinancing. Economists expect that both wholesale sales and inventories expanded by a healthy 0.4 per cent in July.

On Thursday the weekly data on claims for unemployment insurance is issued alongside the monthly federal budget data. Economists expect that the budget was in deficit by $US105bn in August.

And after a relatively uneventful four-day period, interest levels pick up on Friday. Not only will retail sales data for August be released, but also business inventories, import and export prices and the preliminary reading on consumer sentiment. Retail sales may have expanded by a good, but not great, 0.3 per cent in August -- both the headline and underlying (non-auto) measures.

In China, the week kicks off on Monday when China releases its exports and imports data. Economists expect that exports grew at an 8 per cent annual rate in August, well ahead of a 1.7 per cent lift in imports. The trade surplus is expected to have remained healthy near $US40bn.

On Thursday China’s National Bureau of Statistics issues inflation data for August for both consumer and producer prices. Inflation is well contained at present with producer prices still falling, not rising. Economists expect that producer prices fell 1.2 per cent over the year to August while consumer prices grew 2.2 per cent over the period.

On Saturday the monthly batch of Chinese economic indicators are released: retail sales, production and investment. There are signs that Chinese economic activity is gaining pace and investors would want to see further confirmation of that trend. Expect annual retail sales growth near 12.2 per cent with production near 9 per cent and investment near 17 per cent. These metrics are effectively the 'new black'.

Over the week (September 10-15) Chinese money supply and lending figures will also be released.

Interest rates

The Reserve Bank board meeting has come and gone for another month and it appears we are set for a long period of interest rate stability -- hardly a bad thing. The overnight index swap market has indicative pricing on the cash rate over the next year. And currently the cash rate is priced at 2.4575 per cent in nine months from now below the 2.50 per cent cash rate.

What about fixed-term rates? The 3-year swap rate stands at 2.96 per cent – not far above the 2.81 per cent record low set on July 18. Bottom line: borrowers have never had it so good.

Savanth Sebastian, CommSec