The Week Ahead

Last big week of economic data for 2014

One of the quirks of the economic calendar is that a barrage of data is released at the start of every season. So the coming week could be aptly described as the Summer Tsunami: around a dozen key indicators and events are scheduled.

The week kicks off on Monday with RP Data-CoreLogic releasing the latest results on home prices. Based on current data, home prices probably fell 0.2 per cent nationally over November.

Also out on Monday is a gauge on inflationary pressures from TD Securities and Melbourne Institute and the Business Indicators publication from the Bureau of Statistics. The former should show that inflationary pressures are contained while the latter will show that companies are racking up solid profits.

On Tuesday, the Reserve Bank Board meets for the final time in 2014, and after that meeting it doesn't meet next until February 2015. The Reserve Bank governor has been trying to get consumers and businesses focused on spending, investing and employing rather than constantly looking over their shoulders about imminent rate changes. Inflation is under control so rates are on hold.

In terms of economic data, data on government spending for the September quarter is released on Tuesday with the balance of payments, building approvals and weekly consumer confidence figures. Dwelling approvals slumped 11 per cent in September, highlighting the volatility of the series. But in trend terms approvals are trending sideways at a high level.

For many analysts the highlight of the week is the economic growth (gross domestic product) report for the September quarter, to be released on Wednesday. And while the report is the most comprehensive assessment of the economy's performance, it is very much backward-looking.

We expect that the economy grew by around 0.7 per cent or around 3.1 per cent over the year – slightly above the 2.9 per cent decade average.

On Thursday, retail trade and international trade (exports and imports) for October are released. The most important is retail trade, and we expect OK (but not great) growth of around 0.2 per cent in the month.

And on Friday, the ABS releases arrivals and departures information. Not only does the data cover the short-term flows of tourists, but the longer-term flow of migrants is important in assessing the outlook for the housing market.

Overseas: US employment in the spotlight

While there are fewer indicators due for release in the US next week than Australia, the most important of the monthly statistics is issued -- that is, non-farm payrolls (employment) -- on Friday.

The week kicks off on Monday with the release of the ISM manufacturing index. Any reading above 50 indicates expansion, so the current figure of 59.0, indicates that activity is strong.

On Tuesday, the monthly auto sales data is released alongside construction spending and the weekly chain store sales figures.

On Wednesday, at least four key indicators or reports are issued. Probably the most influential is the Beige Book, a summary of conditions across Federal Reserve districts. The report will be a key input to the decisions made by Federal Reserve policymakers at their next meeting. Also released on Wednesday are the weekly housing finance figures, the ISM services index and the ADP report on private sector job creation.

The services sector in the US is broadly in the same good shape as manufacturing, as shown by the October reading of 57.1.

On Thursday, the usual weekly data on claims for unemployment insurance (jobless claims) is issued together with the Challenger survey of job cuts.

And then on Friday, the non-farm payrolls data is released alongside the monthly trade figures, consumer credit and factory orders. In October, 214,000 jobs were created, close to the average rate of 220,000 over 2014. And the jobless rate hit a 7-year low of 5.8 per cent. Analysts are looking for more of the same in November: around 230,000 jobs created and a jobless rate of 5.8 per cent. If job creation proves far stronger and associated with yet another drop in the jobless rate then analysts will need to re-think the timing of the first rate hike – currently slated for the second half of 2015.

In China, the key dates for economic data are Monday and Wednesday. On Monday the official (National Bureau of Statistics) purchasing manager's index for manufacturing is released alongside the HSBC version of the report. And on Wednesday both bodies release the equivalent purchasing manager's indexes for the services sector.  The services sector is arguably more important than manufacturing, but investors have to get their heads around this new reality.