No highlights, but plenty on offer
Over the coming week there are two key economic or financial events scheduled each day, but there are no stand-outs from the congested field of events.
The week kicks off on Monday with the Australian Bureau of Statistics releasing lending finance figures while the Reserve Bank issues the August data on credit and debit card lending.
The clear result from each is that Aussie consumers are becoming more confident to embrace debt. In trend terms new personal loans are growing at a 5.4 per cent annual rate, above the decade average of 2.3 per cent. While credit card debt is still down on a year ago, the rate of decline has narrowed from 2.3 per cent to 0.2 per cent.
Overall, new lending is growing at an annual rate of 25.2 per cent, well above the decade average of 5.2 per cent. The Reserve Bank says credit growth is “moderate”, but that description will change to “solid” over the next year as the new commitments feed into credit (or the stock of loans outstanding) and fewer current or ‘old’ loans are repaid.
On Tuesday, the National Australia Bank will release its September business survey. Just like other surveys from Dun and Bradstreet and the Australian Chamber of Commerce and Industry, the NAB survey will confirm healthier business conditions. The weekly ANZ-Roy Morgan consumer confidence rating is also released on Tuesday while Reserve Bank Assistant Governor (Financial Markets) Guy Debelle will deliver a speech.
On Wednesday, the ABS will release data on dwelling starts within its Building Activity publication. The monthly Westpac-Melbourne Institute consumer sentiment index will also confirm results from the timelier weekly survey. And ABS data on new vehicle sales will echo the industry figures, showing record sales for any September month.
On Thursday, the ABS releases more detailed job market data for September, which includes dissections across regions and demographic groups.
Also on Thursday, Reserve Bank Assistant Governor (Financial Markets) Guy Debelle will also participate in a panel discussion at a conference.
Overseas: China vies with the US for investor attention
Chinese economic data is now a regular feature on the global economic calendar. However, China has still some work to do to rival the US in terms of the breadth and depth of information provided.
In China, the week kicks off on Monday with September trade figures. Exports are healthy, reflecting improved global demand – especially in the US. But import growth has been sluggish of late, reflecting the challenges of rebalancing the Chinese economy.
And on Wednesday in China, the September inflation data is released. As for most parts of the globe, inflation is not a problem at present.
In the US, the usual weekly chain store sales data is released in the US on Tuesday. And on Wednesday the weekly report on mortgage transactions -- purchases and refinancing -- is released together with the producer price index (the PPI or business inflation) and retail sales. The core PPI probably rose a tame 0.1 per cent in September, while retail sales (excluding cars) probably rose 0.3 per cent in the month -- good, but not great.
On Thursday, the weekly data on claims for unemployment insurance is issued together with industrial production, the influential Philadelphia Federal Reserve survey, the survey of housing activity from the National Association of Home Builders (NAHB) and capital flows data. Finally, data on housing starts and consumer sentiment will be issued on Friday.
Commodity prices and the Aussie dollar
There have been four occasions when the Reserve Bank’s SDR (currency-neutral) measure of its commodity index has been near the current level of 78.5. There was February/March 2010 when the Aussie dollar averaged US90 cents (trade weighted index 70.0); February/March 2009, Aussie dollar US65.7c (TWI 55.0); March/April 2008, Aussie US92.8c (TWI 70.0); and of course the latest reading (September 2014), Aussie US90.3c (TWI 71).
But while the Reserve Bank commodity index best represents the commodity mix in Australia, unfortunately the Great Commodity Boom from 2007 makes it difficult to reconcile the Aussie dollar with other commodity cycles in the past.
The Thomson Reuters CRB commodity futures daily index has a long history that enables comparisons with the Aussie dollar before the Great Boom. And using long-term averages (100 day moving averages) further assists analysis.
On commodity prices alone you could see how the Reserve Bank would feel more comfortable with the Aussie near US80c, than US90c. Of course, many other factors go into determining a “fair value” for the Aussie, but it is something to mull over.