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James
Craig James - CommSec
Economy Expert
+ About Craig James
About Craig James

Craig James is CommSec’s Chief Economist.

On leaving school Craig James joined the (then) Rural Bank, whilst undertaking university studies. He received his Bachelor of Commerce (Economics) at University of NSW in 1984 and then a Master of Commerce (Economics) at the same university in 1988.

He remained at the Rural Bank, which became the State Bank over time and then Colonial, working in branches, Corporate, Planning and Economic Research.

He became chief economist of Colonial Group in September 1987, before becoming chief economist at CommSec in August 2000 with the Commonwealth takeover of Colonial.

In 2002 Craig had a sea-change, joining the Australian Financial Review. He had always wanted to pursue a role in journalism and enjoyed the role as an economic commentator and analysts, finding that he could pursue a journalistic-type role as well as doing more electronic media work at CommSec and rejoined the group in 2003.

On taking the reigns of chief economist at Colonial, Craig endeavoured to style their research in a “user-friendly” way – something that set their research apart and still does today. The approach has been successful in their media work and in promoting Colonial, and then CommSec, to the general public. CommSec is the most quoted economic group in the mainstream media.

CommSec economic reports are a bit different in that they devise tools such as the ‘Mums and Dads’ share index and the iPod index, and undertake research on the weather and demographic changes to show how they affect the economy.

Craig currently does around 2-3 regular TV crosses a day, ad hoc radio and newspaper interviews and writes regular commentaries as well as presenting to staff, clients and external organisations.

Outside work, Craig's main interests are athletics (cross country in winter), weight training, reading widely across a range of newspapers, magazines and electronic media, and trying to keep up with the children.

Investor signposts

Friday, December 08, 2017

By Craig James

Australia: Business survey & jobs in the frame

The highlight in the coming week is the monthly employment report. But there will be plenty of interest in the latest business survey and also the population figures.

The week kicks off on Tuesday with the Australian Bureau of Statistics (ABS) releasing the September quarter Residential Property Price indexes. While the data on home prices is somewhat dated, other figures are provided including those on the number of homes, permitting estimates on the number of people per home.

But the indicator that will attract the most attention on Tuesday is the National Australia Bank business survey. Business conditions are the best in the 20-year history of the survey. At the same time business confidence levels are good, no doubt given the strength in profitability.

Also to be released on a busy Tuesday is data on lending finance. This is the broader measure of new lending, including personal, business, lease and home loans. 

And the Reserve Bank also issues its own lending figures on Tuesday – data on credit and debit card lending. The average outstanding balance on credit cards across Australia is near 9½ year lows.

The usual weekly measure of consumer sentiment from ANZ and Roy Morgan is also released on Tuesday. 

On Wednesday, the monthly measure of consumer confidence is released from Westpac and the Melbourne Institute. The report is now primarily of interest as a check on the weekly survey. But each quarter there is a survey on the wisest places for new savings and this survey will be issued on Wednesday.

Also on Wednesday, the Reserve Bank Governor, Assistant Governor and Head of Payments Policy all deliver speeches.

On Thursday the ABS releases the November job report. In October employment rose for the 13th straight month, up by 3,700 in October. And the unemployment rate fell from 5.5 per cent to 5.4 per cent – the lowest jobless rate since February 2013. CommSec expects that jobs rose by 20,000 in November with the jobless rate stable at 5.4 per cent.

Also on Thursday, the ABS releases the latest population figures (September quarter) as well as the October data on tourist arrivals and departures. Population is growing at a 1.6 per cent annual rate. 

And in terms of tourism, China has now firmly displaced New Zealand as the largest source of tourists to Australia.

Overseas. US Federal Reserve to lift rates? Chinese monthly data.

 The key event in the coming week is the US Federal Reserve meeting. And close behind is the release of key monthly Chinese economic activity data.

 In the US, the week kicks off on Monday with the release of the Employment Trends report and the JOLTS job openings series. The October data showed that demand for jobs remained strong with job openings of 6.1 million, near record highs.

 On Tuesday the National Federation of Independent Business (NFIB) issues the November small business survey while the monthly Federal Budget figures are also released. But the key data is producer prices (business inflation). If the core measure (excludes food and energy) lifts 0.3 per cent as expected after October’s 0.4 per cent gain then investors will speculate whether inflation is making a comeback.

The usual weekly data on chain store sales is also released on Tuesday.

The Federal Reserve meets over Tuesday and Wednesday with a quarter percent rate hike expected to be delivered on 6am on Thursday morning Sydney time. And then the speculation will begin on when, and to what extent, the Federal Reserve will lift rates in 2018.

 On Wednesday in the US the consumer price index for November is released. The annual rate for the core measure is 1.8 per cent, still below the Federal Reserve’s favoured area of 2 per cent. And that isn’t expected to change with a 0.2 per cent lift in the monthly measure of prices.

The usual weekly data on mortgage finance is also issued on Wednesday.

 On Thursday the spotlight shifts to the monthly activity data for China, covering retail sales, production and investment. While overall economic growth appears to have has slowed modestly, retail sales is still growing at a 10 per cent annual pace – amazing for the second largest economy on the globe.

In the US on Thursday, November figures on retail sales are released together with export and import prices. Economists tip a 0.3 per cent lift in spending in November after October’s 0.2 per cent gain. Excluding new autos (vehicles) sales may posted a stronger 0.6 per cent increase in November.

 The usual weekly data on new claims for unemployment insurance in the US is also issued on Thursday.

 Also on Thursday the “flash” Markit manufacturing readings are released in the US, Europe and Japan.

 On Friday in the US data on industrial production is expected with the New York Federal Reserve manufacturing index and net capital flows data. Production posted a strong 0.9 per cent increase in November but this reflected the recovery from the impact of Hurricanes Harvey and Irma.

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Investor signposts: Reserve Bank and economic growth

Friday, December 01, 2017

By Craig James

The week kicks off on Monday with the Australian Bureau of Statistics (ABS) releasing the September quarter Business Indicators publication, which includes data on profits, sales, inventories and wages. Solid profit growth has been achieved by Australian businesses over the past year. In the year to June, profits hit a record $304 billion, up by 20.9% on a year ago.

Also released on Monday is data on job advertisements from ANZ. While job seekers have more choices on where to look for work, online and newspaper job ads are still regarded as key leading indicators for the job market. Job ads are at 6-year highs.

The Reserve Bank Board meets on Tuesday for the final time this year. No change in monetary policy settings are expected. Interest rates are firmly on hold until at least the end of 2018 due to constrained inflation. Earlier, Assistant Governor (Business Services) Lindsay Boulton speaks at the High Security Printing Asia conference.

Also on Tuesday, the ABS issues the broader trade data for the September quarter – the balance of payments and foreign debt figures. The current account deficit widened to $9.6 billion in the June quarter which equates to around 2.1% of GDP, the lowest level since the mid-1970s.

Retailers have been successful in cutting costs, allowing prices to fall. But strong local and global competition is also serving to keep prices low. Retail trade data was flat in September after falls in the previous two months. Data on new vehicle sales and the weekly survey of consumer sentiment are also released on Tuesday.

Also on Tuesday, the ABS releases the government finance data. The spending figures (consumption and investment) are a key input into the following day’s economic growth estimates.

On Wednesday, the September quarter National Accounts are released. The main interest is in the economic growth figures (the change in GDP) but the data also includes other estimates such as household consumption. The economy probably grew by 0.5% in the quarter and 2.8% over the year.

On Thursday, the ABS releases international trade (exports and imports) for the month of October. Australia is now paying its way in the world with higher volumes of iron ore, coal and liquefied natural gas boosting exports together with increased foreign demand for Australia’s high quality agricultural products and services, such as education. In September, the trade surplus doubled to $1.75 billion, driven primarily by a surge in iron ore exports.

On Friday, the October data on home loans is released. Based on data from the Bankers Association, total lending for housing fell by 3.0% in the month. The value of loans for investors fell by 6.2% in September, with loans 13.1% below the most recent peak in January due to tighter lending restrictions.

Overseas: US employment and China inflation in focus

There are several data standouts in the US and Chinese economic calendar over the coming week. The US employment report and Chinese trade and inflation figures are of major interest.

In the US, the week kicks off on Monday with the release of the ISM New York index and data on factory and ‘final’ durable goods orders.

On Tuesday, the October US trade figures are released with the November ISM purchasing manager’s survey for the services sector. Economists expect that the ISM index fell to 59.3 in November from 60.1. Any reading above 50 indicates expansion of the services sector. Data on chain store sales will also be released.

On Wednesday, the private sector (ADP) employment report for November is released and 214,000 jobs are expected to have been generated over the month. Revised September quarter figures on labour costs and productivity in the US are also due.

On Thursday consumer credit data for October, Challenger data on job layoffs for November and the usual weekly data on jobless claims (new claims for unemployment insurance) are released.

On Friday, the keenly-awaited US employment (non-farm payrolls) report is released for November. The unemployment rate is tipped to stay near 16-year lows at 4.1/4.2% with a further 185,000 jobs forecast.

Also on Friday wholesale sales and inventories figures are scheduled for release, together with the preliminary reading of consumer confidence for December. Consumer confidence is at 17-year highs in the US.

Major November China indicators to watch include the private sector focused Caixin purchasing manager’s services survey (Monday), trade data (Friday) and inflation data – producer and consumer prices (Saturday).

Financial markets

The end of the year is fast approaching with a little over a month left of 2017. The ASX 200 is up by around 5.6% over 2017 so far with the All Ordinaries up 6.1%. But total returns on shares are up 10.5%, highlighting the importance of dividends.

The Aussie dollar started the year at its low point of US72.36 cents. The high point of US81.21 cents occurred in early September. The Aussie dollar is up around 5% in 2017.

And 90-day bills started 2017 at 1.82% with 2-year bonds at 1.91% and 10-year bonds at 2.77%. Currently 90-day bills are at 1.73% with 2-year bonds at 1.75% and 10-year bonds at 2.51%. The yield curve has flattened.

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Housing and capital spending dominate last week of month

Friday, November 24, 2017

 By Craig James
 
In Australia, the month of November finishes with a raft of housing data releases. And a key focus for investors will be the private capital expenditure quarterly data which feeds into the Australian economic growth (GDP) report the following week.
 
The week kicks off on Tuesday when ANZ and Roy Morgan release the weekly survey of consumer sentiment. Recent data shows confidence has risen to 16-week highs due to an upswing on the views for current and future economic conditions.
 
On Thursday, the Housing Industry Association (HIA) releases its latest update on new home sales. Sales fell by 6.1 % in September led by a 16.7 % decline in apartments.
 
Also on Thursday building approvals data is released. Approvals rose by 1.5 % in September but are just 0.2 % higher over the year. While residential approvals are off the peak reached in mid‑2016, they remain at a high level. This suggests residential construction activity will remain firm.
 
On Thursday, the Bureau of Statistics (ABS) releases the “Private Capital Expenditure” survey for the September quarter. Non-mining investment lifted by 2.6 % in the June quarter. Record high readings for business conditions and profitability in recent NAB business surveys imply that non-mining business spending plans for equipment, plant and machinery will remain strong. Mining spending fell by 2.8 % in the June quarter. The decline in mining investment is nearing a bottom with just a few LNG projects still to be completed.
 
Also on Thursday, the Reserve Bank releases private sector credit data for October. Annual growth is 5.4 %, but is expected to slow due to a moderation in housing credit following a tightening in policy on interest-only loans and investor lending. Traders will be looking for signs of a pick-up in business credit which has lagged upbeat business outlook surveys.
 
On Friday, the Commonwealth Bank releases the manufacturing purchasing manager’s index for November. Australian manufacturing activity remains solid and expectations for future output are elevated.
 
Also on Friday, CoreLogic announces the monthly home price data for Australian cities and states. Auction clearance rates in Sydney have remained below 60 % since the last week of October, pointing to a softening in prices in Australia’s most populous city.
 
Elsewhere, Hobart’s attractive affordability is driving up home prices.
 
Overseas: US data deluge and China manufacturing activity in focus
 
The week commences in the US on Monday with the release of new home sales data for October. US housing supply is extremely lean, limiting more robust sales following hurricane impacts in the south of the country. Sales are forecast to decline to around 620,000 units in October from 667,000 units in September. The Dallas Federal Reserve also releases its October manufacturing activity gauge.
 
On Tuesday, “advance” data is expected to show that the US trade deficit widened from $64.1 billion in September to US$65.5 billion in October. The Conference Board measure of consumer confidence is also released on Tuesday and is tipped to remain near 17-year highs on upbeat attitudes towards the buoyant jobs market, pointing to potentially stronger consumer spending. The Richmond Federal Reserve survey is also due.
 
Also on Tuesday two prominent US home price measures are released for September. Both the Federal Housing Finance Agency (FHFA) and the S&P CoreLogic Case Shiller home price gauges should show US home price growth growing around a 6-7 % annual pace with home ownership vacancy rates at 16-year lows.
 
Wednesday is a busy day for economic news in the US with outgoing Federal Reserve Chair Janet Yellen testifying at the US Joint Economic Committee. Her speech will be keenly observed for clues on whether the central bank intends to lift interest rates at its December meeting, as widely expected by the market. The Fed’s Beige Book detailing national economic activity is also released on Wednesday.
 
Also on Wednesday the second estimate of US economic growth for the September quarter is tipped to show that GDP expanded at a 3.2 % annual rate, up from 3.0 % in the first estimate.
 
On Thursday US personal income and spending data is released containing the Federal Reserve’s preferred measure of inflation – the core personal consumption expenditure (PCE) deflator. Economists expect a moderate 0.2 % rise in October, keeping annual inflation well below the Fed’s 2 % inflation target.
 
On Thursday attention turns to China with the November manufacturing and services purchasing managers indexes from the National Bureau of Statistics. After reaching 5-year highs, manufacturing activity has moderated in response to a policy clampdown on pollution and property speculation. The private sector focused Caixin gauge on manufacturing is released the following day on Friday. 
 
Also on Friday the ISM releases the US manufacturing purchasing manager survey results for November. In October activity eased modestly, but from 13½-year highs. Also data on construction spending and new auto sales are released on Friday.
 
Financial markets
 
The US Senate is expected to vote on President Trump’s tax bill during the coming week after the House of Representatives approved the package. Tax cuts have effectively been “priced in” and since the US election on November 8 last year, the US S&P500 Index has increased by over 21 %.
 
According to Factset data, in the past year there have been nearly three times as many weeks with market gains above one percent as those weeks with losses of one percent or more. This makes it one of the most profitable markets to have invested in for some time. Overall, the “Trump Rally” is the fifth strongest post-presidential election equities rally since 1950. The “Clinton Rally” of 31.7 % from November 5 1996 remains in first place.

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Investor signposts: Reserve Bank dominates proceedings

Friday, November 17, 2017

By Craig James

If it wasn’t for the Reserve Bank, the domestic calendar in the coming week would be decidedly thin. In the US, there are few key events in a holiday-shortened week. Minutes of the last central bank policymaking meetings are released in Australia and the US.
 
The week kicks off in Australia on Monday when CommSec releases data on average floor size for new homes across Australian states and territories.
 
Also on Monday there are two speeches from Reserve Bank officials. Jonathan Kearns, head of financial stability, speaks at the Aus-China Property Developers, Investors and Financiers event. And Marion Kohler, head of domestic markets, speaks at the Australian Securitisation Forum 2017.
 
The procession of Reserve Bank officials to the podium continues on Tuesday when Michele Bullock, assistant governor (Financial System), speaks at the Women in Payments Symposium.
 
On Tuesday, ANZ and Roy Morgan release the weekly survey of consumer sentiment. Recent data shows confidence has been tracking sideways in trend terms.
 
Also on Tuesday the Reserve Bank releases minutes of the last meeting released on November 7. There will be few fresh insights. The Board released its customary statement after the meeting and on November 10 the quarterly Statement on Monetary Policy was released with updated economic growth and inflation forecasts.
 
The Reserve Bank Governor, Philip Lowe, also delivers a speech on Tuesday to the Australian Business Economists annual dinner. No topic has been set as yet, but there will be plenty of questions posed by economists to the Governor.
 
On Wednesday, the Australian Bureau of Statistics (ABS) releases the publication “Construction Work Done” for the September quarter. The data on residential building will be included in the economic growth figures to be released on December 1. And the data on commercial building and engineering construction will provide an insight on business investment.
 
Also, data on skilled vacancies is released on Wednesday.
 
On Thursday, the ABS releases detailed estimates on the job market including demographic and regional estimates of employment and unemployment.
 
On Friday, the ABS releases new productivity estimates: “Estimates of Industry Multifactor Productivity, 2016-17”. The data will provide insights into the most productive industry sectors.
 
Overseas: US investors to give thanks
 
It is a holiday-shortened week for economic data in the US with Thanksgiving Day celebrated on Thursday.
 
The week commences in the US on Monday with the release of the leading index from the Conference Board. The leading index fell 0.2% in September with the Conference Board noting it was the first fall in 12 months and said it was “partly a result of the temporary impact of the recent hurricanes”.
 
On Tuesday in the US, existing home sales data for October is released. The Chicago Federal Reserve also releases its national economic activity gauge, also for October. Economists expect that home sales edged higher from a 5.39 million annual rate to 5.42 million in October.
 
Also on Tuesday is the regular weekly data on chain store sales from Redbook Research.
 
On Wednesday, a key measure of business investment is released – durable goods orders. After rising 2% in September, economists are expecting another lift in October, this time by around 0.5%.
 
Also on Wednesday the US Federal Reserve releases minutes of the meeting held over October 31 and November 1. Investors will be hoping for fresh insights on whether the Fed will lift rates at the final meeting for the year over December 12-13.
 
Clearly Wednesday is a busy day, being the day before Thanksgiving. The usual weekly data on jobless claims – new claims for unemployment insurance – is released. And the University of Michigan releases the November estimates for consumer sentiment.
 
On Thursday in Europe, the Markit organisation releases “flash” purchasing manager survey estimates for manufacturing in Germany, France and the Eurozone.
 
And on Friday Markit releases the “flash” US manufacturing and services purchasing manager’s survey results.
 
Financial markets
 

The Australian sharemarket shares a common feature with other key global bourses – the past year has proved relatively more stable than average. That is, if you measure volatility as daily changes in the ASX 200 of 1% or more – either up or down. In the past year, there have been just 26 days where the ASX 200 has risen or fallen by more than 1%. That is the lowest result in just over 12 years – since the year ending September 2005.
 
In data going back over 20 years, the least volatile period was the year to January 2005 when there were just 9 days when the ASX 200 rose or fell more than 1%.
 
The most volatile period was in the global financial crisis – in the year to January 2009 there were 163 days when the ASX 200 rose or fell more than 1%.
How long this period of low volatility lasts is anyone’s guess. But more stable periods tend to be more positive periods for sharemarkets – longer-term investors are put off by volatility.

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Investor signposts: Wages to lift

Friday, November 10, 2017

By Craig James

Australia: Employment and wages dominates the agenda
 
A busy week lies ahead in Australia. The labour market dominates the economic agenda with employment and wages data released.
 
The week kicks off in Australia on Monday when the Reserve Bank of Australia (RBA) releases September credit card lending data. Card balances are at the lowest level since December 2007.
 
Also on Monday the Australian Bureau of Statistics (ABS) releases the September data on lending finance. Total new lending commitments (housing, personal, commercial and lease finance) increased by 1.9% in August.
 
The Reserve Bank Deputy Governor, Guy Debelle, also speaks on Monday at the UBS Australasian Conference.
 
The National Australia Bank business survey for October is released on Tuesday. In smoothed terms, business conditions are the best in nine years and company profitability is at 9½-year highs. Confidence is at 6-year highs in smoothed terms.
 
Also on Tuesday, ANZ and Roy Morgan release the weekly survey of consumer sentiment. Recent data shows confidence has been tracking sideways in trend terms.
 
Westpac and the Melbourne Institute release the monthly series on consumer confidence on Wednesday.
 
Also on Wednesday, the much-anticipated September quarter Wages Price Index is released by the ABS. Annual wages growth has been stuck at record low levels of 1.9%. The recent 3.3% increase to the national minimum wage from July 1 is expected to lift wages. The reading is important for the inflation outlook.
 
The Reserve Bank Assistant Governor (Economic), Luci Ellis, speaks at the Stan Kelly Lecture in Melbourne also on Wednesday.
 
On Thursday, the ABS releases October employment data. Jobs growth has been strong with 372,000 positions created over the past 12 months. The unemployment rate is at a 4½-year low of 5.5%. Leading indicators, such as ANZ job ads are at 6-year highs and ABS job vacancies are at record highs, pointing to continued robust hiring conditions. Jobs are forecast to lift by 23,000 in October with the unemployment rate unchanged.
 
On Friday, new vehicle sales data for October is released by the ABS. Industry data has already been released showing sales to be up 2.6% on a year ago. Tourist arrivals data is also due on Friday.
 
Overseas: US inflation and housing in focus; China monthly activity data
 
There are a bevy of ‘top shelf’ US economic indicators to be released over the coming week.  Also the Chinese monthly activity indicators are due for release.
 
The week commences in China on Tuesday with the release of October data on retail sales, investment and production. The economy is currently in solid shape with double-digit annual growth of retail sales prevailing.
 
Also on Tuesday in the US, the October data on business inflation – the Producer Price Index – will be issued alongside the NFIB small business index and a speech by Federal Reserve Chair, Janet Yellen.
 
On Wednesday, the Consumer Price Index (CPI) data will be released in the US. Headline prices are tipped to increase by 0.1%, to be up 2.2% over the year to October. The core inflation reading, which excludes the more volatile energy and food price components, is forecast to rise by 0.2% to an annualised growth rate of 1.7% in October. Despite the subdued inflation data, the US Federal Reserve is likely to increase interest rates in December due to strong economic and jobs growth.
 
Also on Wednesday US retail sales data for October is released with a 0.1% lift expected after the 1.6% increase in September. The Empire State survey and capital flows data are also issued on Wednesday.
 
On Thursday data on industrial production and trade (export/import) prices for October are announced in the US. Industrial production is tipped to recover in the aftermath of Hurricanes Harvey and Irma, rising by 0.5%.
 
Also on Thursday the closely-watched Philadelphia Federal Reserve survey is released with the weekly data on claims for unemployment insurance (jobless claims).
 
On Friday, the focus will be on the US housing market. Housing starts are expected to have lifted to a 1.19 million annual rate in October from 1.127 million units in September. And building permits are tipped to have lifted 1.8%. Homebuilding had declined to a one-year low due to severe storms in Texas and Florida. The National Association of Home Builders sentiment index is also released on Friday.
 
Financial markets
 
The US House of Representatives is expected to vote on President Trump’s tax bill during the week, which could be a potential driver for US sharemarkets.
 
The US earnings season is still underway. Several household names such as Home Depot, United Parcel Service, Cisco, Target and Wal-Mart are due to report earnings during the week. Earnings for S&P500 companies in the September quarter are expected to have increased around 8%, well above expectations for a 5.9% increase at the start of October according to Thomson Reuters.

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Investor signposts: Reserve Bank meets

Friday, November 03, 2017

By Craig James

It is a quiet week for economic data in the US and Australia. The Reserve Bank dominates the key local events.
 
The week kicks off in Australia on Monday when ANZ releases the October data on job advertisements. The job ads series measures newspaper and online advertisements. But available jobs are also advertised on corporate websites and social media. So, the job ads series can be considered a good, but not great, forward-looking gauge on employment. In September, job ads fell by less than 0.1% after six straight months of gains.
 
Also on Monday, the Australian Bureau of Statistics (ABS) releases the new weighting pattern for Australia’s premier inflation measure – the Consumer Price Index. And the ABS releases the annual data showing the number of people studying in Australia. The data can provide fresh insights on available workers and the overall state of the job market.
 
On Tuesday, ANZ and Roy Morgan release the weekly survey of consumer sentiment. Consumers can’t be described as overly optimistic at present but neither can they be described as overly pessimistic.
 
The National Australia Bank business conditions index is released on Tuesday and it is one of the best economic indicators that exists in Australia. In smoothed terms, business conditions are the best in nine years.
 
Also on Tuesday the Reserve Bank Board meets for the second last time this year. And just like the previous nine meetings in 2017, official interest rates will be left on hold. The main development over the month has been the inflation data – not just consumer prices but producer and international trade prices. And it is clear that inflation is well contained and is likely to remain contained into the early months of 2018.
 
It is still more likely that rates will rise at some point in 2018, but more likely later in the year rather than earlier. Our view is that the first rate hike will occur in the December quarter of the year.
 
On Thursday, the Australian Bureau of Statistics (ABS) releases data on home lending. More precisely, the ABS measures the commitments made by lenders to advance funds to budding home purchasers. Of course, these commitments may not get taken up if the budding purchaser doesn’t find the dream home. And lenders may also seek to withdraw the offer if certain conditions aren’t met.
 
In August, the number of loans rose by 1% – the fourth straight months of gains – with the value of loans up by 2.1%.
 
On Friday, the Reserve Bank releases its quarterly Statement on Monetary Policy. As well as being a comprehensive assessment of the state of the economy, the RBA also provides updated forecasts. Few changes are expected.
 
Overseas: Quiet week in the US; Chinese trade and inflation data
 
The US economic data release schedule for the coming week is probably the smallest for the entire year. There are few highlights. Chinese data could prove of greater interest.
 
The week kicks off on Tuesday with the release of the JOLTS survey – job openings and labour turnover series. The data is produced by the Bureau of Labor Statistics and includes “employment, job openings, hires, quits, layoffs and discharges, and other separations.” The BLS also note “The number of unfilled jobs—used to calculate the job openings rate—is an important measure of the unmet demand for labor.”
 
Also on Tuesday in the US the September data on consumer credit is released (effectively lending to consumers) together with the usual weekly figures on chain store sales – a measure of consumer spending.
 
On Wednesday in the US the usual weekly data on mortgage applications is released – both applications to buy homes as well as refinancing transactions.
 
On Thursday, the usual weekly gauge on the job market – new claims for unemployment insurance (or jobless claims) – will be issued. The job market is strong with jobless claims hovering around levels last seen in the early 1970s. Data on wholesale inventories is also set down for release on Thursday.
 
On Friday, the University of Michigan provides the first look at consumer sentiment in November – in other words the preliminary measure. In contrast to Australia, consumers are “feeling the love” of the economy. The sentiment index is at the highest levels since early 2004.
 
In China, key economic data is released later in the week. On Tuesday, the October data on foreign exchange reserves is released. Reserves have lifted for the past eight months and stand at US$3.109 trillion.
 
On Wednesday in China the October trade data is issued. Over the year to September, exports were up by 18.6% with exports up 8.1%.
 
On Thursday in China the October inflation data is scheduled. In the year to September, producer prices were up by 6.9% with consumer prices up 1.6%. At face value inflation is contained, but food prices are down 1.4% on the year with non-food prices up 2.4%. So, there is no room for complacency.
 
Financial markets
 
A new month has begun – so how does November stack up for investors? The answer is not encouraging. In fact, the sharemarket has only lifted twice in November in the past decade, falling on average 2% a month.
 
Still, in the previous decade (1997-2006) November was the stand-out performer – lifting on all but one occasion, averaging gains of 2.2%.
 But over the last 70 years, November was the third worst performer.

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Investor signposts: Fed meets in US

Friday, October 27, 2017

By Craig James

Key measures of economic activity
 
The key monthly measures on economic activity are scheduled for release in Australia, US and China in the coming week.
 
The week kicks off in Australia on Tuesday with the Reserve Bank releasing private sector credit (or outstanding loans) data. In August, credit rose 0.5% to be up 5.5% on the year with business and home loans driving the gains while personal lending continues to retreat.


 
Also on Tuesday, ANZ and Roy Morgan release the weekly survey of consumer sentiment. The data can be volatile so it is best to monitor longer-term trends. Consumers can be best described as nonplussed at present.
 
The Housing Industry Association also releases new home sales data on Tuesday, a closely-watched measure of home demand.
 
On Wednesday CoreLogic releases its October data on home prices. Based on daily data released so far, Australian home prices were flat in October. But while Sydney home prices eased by 0.3%, Melbourne prices moved higher by around 0.3%. The data should add to the case for leaving interest rates unchanged.


Also on Wednesday, Commonwealth Bank and Australian Industry Group produce their separate gauges on manufacturing activity. And the Australian Bureau of Statistics (ABS) releases inflation data for different groups in the economy like pensioners and self-funded retirees.
 
On Thursday, the ABS releases September data on international trade and building approvals. In August ,the trade surplus rose from $808 million to $989 million. And the rolling 12-month surplus rose from $14.0 billion to a record $16.8 billion. In addition, the data showed that Australia's annual exports to China lifted from $96.5 billion to a record high of US$98.6 billion in the year to August.
 
In terms of council approvals to build new homes, they rose by 0.4% in August after falling 1.2% in July and soaring by 11.1% in June. In trend terms, approvals rose for the seventh straight month, up by 1.1%.
 
On Friday, the ABS issues the September retail trade figures – including, not just the monthly data, but the quarterly results of the volume of goods purchased. Sales fell 0.6% in August but retail trade only accounts for 30% of household spending, so it is more focussed on sales of goods rather than services. As a result, the data may be highlighting a shift in the sorts of things that consumers are purchasing.
 
The October data on new vehicle sales is released by the Federal Chamber of Automotive Industries on Friday.
 
Overseas: A big week for economic events

There is a packed schedule of economic data releases in the coming week including data on US employment, gauges of Chinese economic activity and a meeting of Federal Reserve policymakers.
 
The week kicks off on Monday with the release of US personal income and spending. While spending is tipped to lift 0.7%, ahead of a 0.4% lift in income, most interest will be in a key inflation measure. The Federal Reserve’s preferred inflation measure – the core personal spending deflator – is tipped to lift 0.2%, keeping the annual rate low near 1.4%.
 
On Tuesday in the US is the quarterly measure on employment costs. Economists tip a mild lift in the growth pace from 0.5% to 0.6% in the September quarter. But this may not be a big enough lift to worry policymakers.
 
Also on Tuesday in the US is the S&P/Case-Shiller home price index, consumer confidence data and the Chicago purchasing managers index.
 
Over Tuesday and Wednesday, the Federal Reserve policymakers meet to decide interest settings (Thursday 4am, Sydney time). Economists don’t expect a move this month but December is seen as an each-way bet.
 
In China on Tuesday the National Bureau of Statistics releases purchasing manager survey results for both manufacturing and services sectors.
 
On Wednesday in the US there is a gamut of economic indicators to be released including new vehicle sales, the ISM manufacturing index, the ADP survey of private employment and data on construction spending.
 
On Thursday, the usual weekly gauge on the job market – new claims for unemployment insurance (or jobless claims) – will be issued together with the Challenger survey of job cuts and quarterly data on productivity and labour costs.
 
On Friday, the all-important employment data is released in the US (non-farm payrolls). After a hurricane-affected 33,000 drop in jobs in September, job growth is tipped to power ahead by 300,000 in October. Average earnings (wages) may have lifted by 0.3% in the month.

The US ISM services index, factory orders and international trade data are also slated for release on Friday.

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Investor signposts: Inflation in focus

Friday, October 20, 2017

By Craig James

Inflation readings dominate in Australia in the coming week. The Consumer Price Index is issued on Wednesday with trade prices (exports and imports) on Thursday and business inflation – producer prices – to be released on Friday.
 
But the week kicks off on Monday with CommSec releasing its quarterly assessment of economic performance across the Australian states and territories – the State of States report.
 
Also on Monday, the Australian Bureau of Statistics (ABS) releases a host of Census results including employment, providing a check on the accuracy of the monthly labour market surveys.
 
On Tuesday, ANZ and Roy Morgan also release the weekly survey of consumer sentiment.


 
On Wednesday, the ABS releases the much-anticipated inflation report for the September quarter. The headline consumer price index is forecast to increase by 0.7% to be up 1.8% on the year due to increasing power and gas bills and housing and tobacco prices.


The key underlying or ‘core’ measure of prices (excluding volatile components such as energy and food prices) is forecast to rise by 0.5%. As a result, annual growth may struggle higher from 1.8% to 2%.
 
On Thursday, the ABS’ trade price indexes for the September quarter are released. Base metals posted hefty gains in the quarter with gold also higher. The general recovery in hard commodity prices continues to support Australia’s export-orientated sectors. In terms of import prices, there was a sharp 12% rise in crude oil prices in the quarter in response to OPEC production restraint.
 
The data on import and export prices provides an early guide to the terms of trade during the quarter. After a 6% fall in the June quarter, some rebound in the measure of income is tipped in the September quarter.
 
Also on Thursday the Reserve Bank Deputy Governor, Guy Debelle, delivers a speech entitled ‘Uncertainty’ at the Warren Hogan Memorial Lecture in Sydney.
 
On Friday, data on producer prices for the September quarter are released. Prices of manufactured goods and services in Australia have remained subdued this year, despite the pick-up in business conditions. Final product prices may have risen 0.5% in the quarter and 1.7% over the year.
 
Overseas: US inflation and economic growth in focus
 

There is a packed schedule of economic data releases in the coming week including data on US GDP growth, inflation and housing activity, as well as Chinese house price data.

The week kicks off on Monday with the release of China house prices data for September.

On Tuesday in the US is the closely-watched Richmond Federal Reserve manufacturing survey.
 
Also on Tuesday across the US, Japan and Europe “flash” readings on manufacturing activity are issued in the shape of the Markit Purchasing Managers indexes (PMIs).
 
On Wednesday, there is a gamut of economic indicators released in the US with data on new home sales, durable goods orders and the Federal Housing Finance Agency (FHFA) measure of home prices.
 
Durable goods – a measure of business investment – may have lifted 1% in September reflecting solid momentum in the US manufacturing sector.
 
New home sales are expected to decline to 550,000 in September from 560,000 in August. The FHFA house price index has increased by 6.3% over the year to July, supported by low mortgage rates and strong jobs growth.
 
On Thursday, the usual weekly gauge on the job market – new claims for unemployment insurance (or jobless claims) – will be issued together with data on pending home sales.
 
On Friday, the first estimate of economic growth (GDP) is released for the September quarter. Growth is expected to moderate to 2.5% due to hurricane-related factors after 3.1% growth in the June quarter.
 
Also on Friday, the US Federal Reserve’s key measure of inflation – the core personal consumption deflator for the September quarter – will also be announced. The final estimate for US consumer sentiment in October will also be released on Friday.

Financial markets
 
The US earnings season is underway and more ‘household names’ will be reporting results over the coming week. On Monday Halliburton is due to report.
 
On Tuesday AT&T, Caterpillar, General Motors and McDonald’s report earnings. On Wednesday Coca Cola and Boeing are amongst those to issue results.
 
On Thursday Amazon, American Airlines, Expedia, Ford, Microsoft and Twitter will issue profit data. And on Friday, Chevron, Colgate-Palmolive, Exxon Mobil and Goodyear are amongst those that plan to issue earnings figures.

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Investor signposts: Job market in focus

Friday, October 13, 2017

By Craig James
 
There are two events that stand out in Australia in the coming week. The first is the minutes of the last Reserve Bank Board meeting on Tuesday. And the second is the monthly job report on Thursday.
 
The week kicks off on Monday with the Australian Bureau of Statistics (ABS) releasing data on both lending finance and tourism flows.
 
Total new lending commitments (housing, personal, commercial and lease finance) fell from 7-month highs in July, down 3.8 %. Commitments had risen by 8.3 % in June. Commitments are still up 4.5 % over the year.
 
In terms of tourism, China has now passed New Zealand as our top source of tourists. China and Hong Kong together passed NZ in tourist numbers in September 2015.
 
On Tuesday, the Reserve Bank releases minutes of the Board meeting held on October 3. The key challenge will be to discern subtle changes in how the Board members view our economy.
 
Also on Tuesday the Reserve Bank Assistant Governor, Luci Ellis participates in a panel discussion at the 9th Annual Australian & New Zealand Investment Conference.
 
ANZ and Roy Morgan also release their weekly survey of consumer sentiment on Tuesday.

And rounding out a packed schedule on Tuesday, the ABS issues data on new vehicle sales. In the nine months to September vehicle sales were ahead of the record 2016 result for the same period.
 
On Thursday, the ABS issues the job market data for September. Employment has been very strong over the past six months with more than 54,000 jobs created in August alone. We expect that strength extended into September with 20,000 jobs created and unemployment falling from 5.6 % to 5.5 %.
 
Also on Thursday the Reserve Bank Assistant Governor (Financial System), Michele Bullock, delivers a speech at the Australian Shareholders Association conference in Sydney.
 
On Friday CommBank releases the Business Sales indicator, measuring economy-wide sales.
 
Overseas: US housing market in focus
 
There is a packed schedule of economic and political events in the coming week including data on US housing activity and production as well as key Chinese economic data. Investors will also focus on the National People’s Congress in China, due to get underway on Wednesday.
 
In the US, the week kicks off on Monday with the release of the New York Federal Reserve manufacturing survey – a key regional gauge of economic activity.

Also on Monday in China, the September data on producer and consumer prices will be released.
 
On Tuesday there is a gamut of economic indicators in the US. Most interest will be in industrial production figures. But there is also capital flows data, import and export prices and the NAHB housing market sentiment index. The usual weekly data on chain store sales is also scheduled. Economists expect that production lifted by 0.3% in September after slumping 0.9 % in August.
 
On Wednesday in the US the September housing starts data is due with the weekly figures on mortgage applications. Economists expect that new housing starts eased from a 1.18 million annual rate in August to 1.175 million in September. And permits may have also eased by around 1.3% after surging 5.7% in August. The forward-looking permits are at 2-year highs and not far off record highs.
 
In China on Wednesday the National People’s Congress convenes. The Chinese Communist Party holds this meeting once every five years, resulting in key changes of the leadership team. Investors will watch over the 10-day event for any changes of economic policies.
On Thursday in China the September data on retail sales, investment and production are released. The last figures were softer-than-expected. But in the period since, the central bank has made efforts to boost activity.
 
Also on Thursday in the US the weekly data on new claims for unemployment insurance is issued together with the Philadelphia Federal Reserve index and the lead index.
 
On Friday in the US, data on existing home sales is released. Sales have fallen for four times in the past five months due in large part to a shortage of stock.
 
Financial markets

 
The US earnings season is underway and more “household names” will be reporting results over the coming week. On Tuesday Morgan Stanley is due to report with Goldman Sachs and IBM. On Wednesday Alcoa, American Express and eBay are amongst those to issue results. On Thursday Travelers, Atlassian and E*TRADE will issue profit data. And on Friday, General Electric, Baker Hughes and Procter & Gamble are amongst those that plan to issue earnings figures.

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Investor signposts: business confidence survey out next week

Friday, October 06, 2017

A quiet week ahead?

Gauges of business and consumer sentiment are in focus in the week ahead together with measures of personal lending – home loans and credit card debt. In the US, inflation and retail sales data and minutes from the past Federal Reserve meeting are the events to watch.

The week kicks off on Tuesday with National Australia Bank releasing the September business survey. The business survey is one of the best gauges of economic activity released each month. Survey forms are sent to businesses; the businesses assess how they are faring and fill out the survey forms accordingly. And finally the survey responses are combined into indicators of business confidence and conditions.

In August the NAB business conditions index rose from +14.1 points to a 9½-year high of +15.2 points. The business confidence index fell from +11.7 points to +5.1 points. (long-term average +5.9 points).

Also on Tuesday the Reserve Bank Deputy Governor, Guy Debelle, speaks at the FX Global code of conduct seminar in Hong Kong.

Also on Tuesday ANZ and Roy Morgan release their weekly survey of consumer sentiment.

On Wednesday the Australian Bureau of Statistics (ABS) releases detailed data on building activity as well as the broader construction sector (includes engineering activity).

Also on Wednesday Westpac and the Melbourne Institute release the monthly series on consumer confidence. This data is more of a check on the more regular weekly series.

On Thursday the Reserve Bank releases August data on credit and debit card lending. In July the average credit card balance fell by $59.90 to a 9½-year low of $3,070.30. In smoothed terms (12-month average) the average balance was down by 0.2 per cent on a year ago. Interestingly usage of credit card limits stood at just 33.7 per cent in July – the lowest level in almost 19 years.

Also on Thursday the ABS releases the August data on housing finance. In July the number of loans (commitments) for budding home owners (owner-occupiers) rose by 2.9 per cent – the third consecutive month of gains. Loans to buy newly-erected dwellings rose by 1.9 per cent to 38-year highs. And the proportion of first-time buyers in the home loan market rose from 14.9 per cent to a 47-month high of 16.6 per cent in July (long-term average 19.4 per cent).

On Friday the Reserve Bank releases the six-monthly Financial Stability Review – an assessment of the health of our financial system. Expect to see detailed analysis of housing supply and demand and discussion of the growth of housing debt in relation to income growth. The topics are clearly more complicated than are being portrayed in the mainstream media and the state of play is far more positive.

Also on Friday the ABS continues with its 2015/16 series on consumer and housing data – this time with a focus on housing occupancy and costs. Understandably more people have chosen to take on greater housing debt at generational-low interest rates. As a result there has been upward pressure on prices in those centres that have been less responsive in building the homes required.

Overseas: Relatively quiet week ahead

Investors will have to wait until the second half of the coming week for the potentially “market-moving” economic events. Minutes of the last Federal Reserve meeting, retail sales and inflation data are the highlights.

In the US, the week kicks off on Tuesday in the US with regular weekly data on chain store sales from Redbook.

On Wednesday the group that sets US interest rates – the Federal Reserve Open Market Committee (FOMC) – releases minutes of the meeting held on September 19/20. Many investors are still uncertain whether the Federal Reserve will lift rates in December. The views and forecasts will be closely dissected by investors.

Also on Wednesday in the US the weekly data on mortgage applications will be released.

On Thursday in the US, the September data on business inflation – the Producer Price Index (PPI) – will be issued. Only a small 0.1 per cent lift in “core” prices is expected, leaving the annual growth rate at 2 per cent.

Also on Thursday is the regular weekly check on conditions in the job market – the data on new claims for unemployment insurance.

On Friday in the US, data on retail sales and consumer prices for September are released together with the early estimate of consumer sentiment for October. Economists expect sales rose by 0.4 per cent after falling by 0.2 per cent in August. And “core” consumer prices may have lifted 0.2 per cent in the month, causing annual growth to lift from 1.7 per cent to 1.8 per cent.

Also on Friday in China is the September international trade figures (exports and imports). Import growth continues to outpace exports at present, suggesting firm domestic economic activity.

Financial markets

Over the past 20 years, October has been the second best month for the Australian sharemarket, falling on just six occasions, second only to December. In fact there has been only one decline in the past seven years in October, rising on average 3.2 per cent over the period. The problem is, when the market does fall, it tends to fall heavily, as evidenced in 1987, 1997 and 2008.

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