Finance & job market take centre-stage
The statistical offerings over the coming week are pretty easy to summarise. Almost all the data can be categorised either under ‘lending’ or ‘job market’ headings.
In Australia, the week kicks off on Monday with the housing finance (new home loan) data for November. Interest rates remain near the lowest levels in a generation while some of the heat has come out of the housing market, leading to greater choice of properties for budding home buyers and softer growth of home prices.
As a result we expect that the number of loans taken out by owner occupiers rose by 4 per cent in November while the value of loans edged up by 1 per cent.
Also on Monday, ANZ releases December job advertisement figures. Job ads have risen for the past six months with annual trend growth lifting to 9.5 per cent. So there are solid signs of healing in the job market.
The Reserve Bank also releases some data on Monday: the November figures on credit and debit card lending. The average credit card balance basically hasn’t budged in five years.
On Tuesday, Roy Morgan and ANZ release the weekly consumer confidence index. Confidence is merely OK at present.
On Wednesday, the Bureau of Statistics releases lending figures. This data includes figures on home loans, but also business, personal and lease loans – so data on lending more broadly across the economy. Also out on Wednesday is ABS data on job vacancies.
On Thursday, the ABS releases December jobs data. The job market is healing; that is clear from the data on job ads. But the healing process will take some time.
We expect that employment rose by 15,000 in December, but that will just be enough to prevent the jobless rate from rising. The unemployment rate was probably steady at 6.3 per cent in December. Also on Thursday the September quarter building activity data is expected, including latest figures on dwelling starts.
Overseas: US inflation in focus
There is a good selection of economic data to choose from in the coming week. Not only will there be indicators of activity in the US, such as spending and production, but there will also be inflation indicators.
In the US, the week begins on Monday with the release of the employment trends report while on Tuesday the regular weekly data on chain store sales is released together with monthly Federal Budget figures, the JOLTS job openings survey and the National Federation of Independent Business survey of small businesses. At present, small business optimism is at a seven-year high.
On Wednesday in the US, data on import and export prices is released together with retail sales and business inventories and the weekly data on mortgage finance. Economists expect that non-auto retail sales rose by 0.2 per cent in December after a 0.5 per cent gain in November. While at face value that suggests a slowdown in spending, lower gasoline prices were an influence, so a little more scrutiny of the data will be necessary.
On Thursday in the US, data on business inflation (producer prices) is issued together with the influential Philadelphia Federal Reserve survey and the usual data on claims for unemployment insurance. The core measure of producer prices (excludes food and energy) is estimated to have lifted 0.1 per cent in December. But there are certainly no signs of deflation with annual growth tipped to have lifted from 1.8 per cent to 2.0 per cent.
And on Friday, there are four indicators that bear watching – consumer prices, production, consumer sentiment and capital flows. The first three rank in equal importance as the Federal Reserve will only lift interest rates if activity is growing and if inflationary pressures are developing. At present, there is certainly no urgency to lift rates with inflation well contained.
Meanwhile in China, the December trade figures are now scheduled for release on Tuesday, a little later than the originally scheduled release time of Saturday (January 10). Looking further ahead, data on house prices is now scheduled for January 18 with spending, production, investment and economic growth on January 20.
Sharemarket, interest rates, currencies & commodities
Economists aren’t convinced but the financial markets have priced in another rate cut to occur sometime over the next year. The overnight indexed swap market has fully priced in a 25 basis point rate cut over the next twelve months. Interestingly, financial market pricing suggests that there is just a 44 per cent chance of a rate cut in the next four months. But in twelve months’ time the OIS market tips a 2.25 per cent cash rate.
Over the past 70 years, January has actually been one of the best months of the year for the sharemarket, rising in 50 of the 70 years. But the performance has been less positive in more recent times. In the past 10 years, the sharemarket has risen just six times during January, while the All Ordinaries index has risen in January in 12 of the past 20 years.
Craig James is chief economist at CommSec.